Europe’s Market Euphoria Over Greek Rescue Turns Sour

The European leaders for the first time also allowed for a "haircut" to private investors, a move that made the deal politically more feasible, but which is already having adverse, though expected, repercussions in Moody's downgrading of Greek debt to one notch above default on Monday.

Bond investors appear to be increasingly taking the view that sovereign debt is a high-risk investment. BNP Paribas analysts are quoted as saying "investors are giving priority to safe investments and are switching to high quality assets, leaving aside those considered risky."

Ironically, BNP's own securities are considered just such a risky asset by U.S. money market funds, which are continuing to decrease their exposure to European banks.

TheStreet.com reports that French banks are particularly exposed to sovereign debt of Euro-periphery countries, and that BNP Paribas alone has nearly half the group's exposure to Italy. BNP shares slid 4.33% Monday in Paris.