Fears mounting over the contagion risks associated with Greece's woes caused the Dow to plunge by 1,000 points and then climb back up by 600 points.

"If this market gets back to down 2% to 3% for the day...that will be one wild ride," said Jesse Litvak, a mortgage trader at Jeffries & Co. "All credit is clearly getting hit, but look at the buying that came in when stocks were down by 1000 points."

Litvak said that nothing was trading in the residential space and that the ABX.HE Index was getting hit. He added that the market could take some solace if the day ends with the Dow dipping only 250 to 300 points.

This comes as Europe prepares to vote for a bill that would grant Greece billions of Euros of in emergency loans.

Athens is set to get a €22.4 billion ($28.5 billion) bailout by eurozone nations and the International Monetary Fund (IMF).

Suki Mann,  a credit strategist at Societe Generale, said that the bailout news seems to have passed without having the desired impact.

"SovX continues to test and re-test wides, and the iTraxx indices have fallen out of bed as the financials index gets battered," Mann said. "And cash, in spread terms, has given up all the gains it had worked so hard to muster since January."

However, the entry point she explained is very different to that than that existed after the Lehman Brothers collapse. She said,"yields are substantially lower and the case for cash is much stronger as the carry is not so negative now."

"This is a much bigger crisis than the Lehman one, but the market has yet to recognize it," Mann said. "And just like the U.S. authorities before it, the European authorities are way behind the curve. In such cases, usually 'cash is king' while we ride out the storm — and yields are so low that the missed opportunity cost is reduced. But this is not quite the situation now, simply because the case for credit remains compelling given the wider sovereign-related situations."

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