When is investment grade not investment grade? Maybe when the market says so.
Looking at sovereign debt ratings compared with the cost of insuring those debts, there are several disconnects between what the credit ratings agencies say and what the credit default swaps market indicates.
That may mean more ratings movements on the cards, but it's also a sign that big investors are starting to do their homework more thoroughly, analysts said.
The risk of default for Greek debt is priced much higher than that of Eastern European countries like Romania or Turkey. But Greece is rated investment grade while the two Black Sea countries are rated below investment grade.
The spread -- premium paid above the nominal value of the derivative -- of Greek CDSs is more than 300 basis points, while Romania's is less than 200 points and Turkey's is even better, at a little more than 150 basis points.
Portugal's CDSs are priced higher than Poland's and only slightly better than Turkey's. Poland has a single-A rating, compared with Portugal's double-A, although the latter was downgraded Wednesday by Fitch one notch to AA-.
"(The difference between ratings and prices of CDSs) is not a paradox; I'd say is a complete anomaly," Simon Quijano-Evans, emerging markets analyst at Credit Agricole Cheuvreux, told CNBC.com.
"This is going to continue like this until they find a solution for Greece," he added.
Rating agencies, which came under fire when the subprime crisis hit because many securitized instruments were rated investment grade, are now too cautious when it comes to upgrading their views, another analyst told CNBC.
"(Rating agencies) tend to be a little bit behind the curve. The market is telling us really what they think and the rating agencies follow," Tim Skeet, a managing director at Bank of America Merrill Lynch, told "Squawk Box Europe."
"In a sense we've almost got to a stage where most big investors will make their own decision as to how risky they think an investment is. Investors do a lot more of their own homework," Skeet added.
Ratings Will Follow
Ratings changes, at least for European countries, are likely to converge in the coming year, Quijano-Evans said. While euro-zone states may be downgraded, Central and Eastern European countries are likely to see their ratings pushed up.
"There is no justification for the multiple notches ratings difference between Turkey and the euro-zone periphery countries," Quijano-Evans said.
Emerging European countries have much lower debt-to-gross domestic product ratios and their reform programs, backed by the European Union and the IMF, are already in place, while there is no euro-zone contingency plan to bail out a member state, Quijano-Evans noted.
"Up until now, the tradition has been that if you're in the euro zone, that should offer some protection," he explained.
"However, this misses the point that it also allowed countries to borrow abroad extensively in their local currency, which was not possible in emerging European countries," he added.
Turkey is likely to reach investment grade next year, while Romania and Hungary's outlooks are likely to be increased this year, according to Quijano-Evans.
European Union leaders have not agreed whether they will offer Greece financial aid and there are discussions on whether the International Monetary Fund should step in, with many critics saying this would be an embarrassment for the EU, as the IMF has mostly bailed out troubled developing countries.
"Judging by events in other countries in the past, including the IMF in any bailout program seems a logical approach, because the IMF has the experience that no one else has," Quijano-Evans said. "You cannot do this kind of thing over night."