Greek bonds are downgraded as junk status because

Stock markets in Europe and the United States have fallen sharply in response to further signs that the debt crisis in Greece is intensifying and could spread to other countries. Share prices in New York, London, Frankfurt and Paris fell by more than 2% after a major international credit rating agency Standard & Poor’s downgraded Greek debt to a level known informally as junk.
    Standard & Poor’s downgraded its assessment of Greek bonds to the so-called junk status because of the growing danger that the bond holders will not be paid back in full. Many big investment funds have rules that forbid them from holding junk bonds, says the move is likely to trigger a further round of selling. Share markets have taken fright, fearing that if Greece does default on its debts, it would hit many European banks which hold Greek bonds and could trigger a wider financial crisis. Already pressure is mounting on Portugal which has also seen its credit rating downgraded today, although it remains above junk status.