Bloomberg: Toyota Motor Corp.’s recall of about 8 million cars has elicited divergent responses from foreign and Japanese investors, with the cost of protecting the company’s bonds against default rising while the yield spread to sovereign debt has varied little this year (see chart).

One reason for the different reactions is that foreign investors are active in Japan’s CDS market, while Toyota’s bondholders are mainly Japanese, said Hisayoshi Nogawa, a strategist at BNP Paribas Securities Japan Ltd. “Foreign investors are cautious about Toyota’s creditworthiness, whereas Japanese don’t expect the recalls to break the automaker’s back,” he said.

Toyota’s credit ratings probably won’t be lowered to the extent that a debt sell-off or default could be triggered, Nogawa said. The automaker is currently rated Aa1 by Moody’s Corp., AA by Standard & Poor’s, and AAA by Japan’s Rating and Investment Information Inc. [Source]