Never mind that Fitch ¬†upgraded Greece’s rating to B minus this week from restricted default after the country completed its bond exchange — for the credit default swap market, the exchange is still classed as a default. And for Greece, that meant ejection this week from the closely-tracked Markit iTraxx SovX Western Europe CDS index.

Poor Greece has been trading in somewhat of a market hinterland since problems with its debt first led to ratings downgrades in mid-2010. It got ejected first from the Barclays and Citi developed world bond indices and last year its corporate bonds were thrown out of BoAMerrill Lynch’s bond indices.

Fund managers often base their investments against these  indices, and are loath to take heavy bets by leaving out any one constituent altogether. But as soon as a constituent is removed, all bets are off.

The problem is particularly acute as most emerging market indices don’t want to take Greece on either. For equity indices, the market is too developed, while for sovereign bonds, it doesn’t have a liquid enough supply of dollar debt.

Meanwhile, the removal of Greece from the SovX index has led to a sharp tightening. The index is trading at 226 basis points today, down from the last close in which it contained Greece, at 353 bps.