For all the speculation over how far Moody's Investors Service will lower the credit ratings of the world's largest banks, debt traders are already treating the firms like they're graded lower than the biggest potential cuts.

Bonds issued by Morgan Stanley and Credit Agricole SA have dropped to prices implying junk ratings, while credit-default swaps on Bank of America Corp., Goldman Sachs Group Inc. and BNP Paribas SA are trading as if the lenders were speculative-grade issuers, according to a separate Moody's unit that analyzes market data. Even the harshest downgrades in the ratings firm's review would leave those banks investment grade.

Investors are fleeing global financial institutions as Europe's escalating fiscal crisis threatens to poison the balance sheets of the region's lenders and spread to trading partners globally. Moody's, which has been reducing ratings for banks from Australia to Austria, has said that 15 banks with a combined $28.2 trillion of assets may be the next group it cuts as part of a review that will conclude this month.