Equity synopsis - Greek bond yields

At one stage the Greek 10Y bond yields reached 36%.

In such cases when government default looks imminent do the asset pricing models collapse because of the absence of a “risk free rate”? I mean why bother with investing in stocks if the sovereign bond is already yielding 36%? On the other hand, would the stock exchange collapse simply because of government default? Still, if an investor invests in a Greek blue chip stock with a return of 10% would you consider it below optimal strategy?