OREANDA-NEWS. Volkswagen AG's five-year Credit Default Swaps (CDS) widened 185% in the two days following news that the car maker allegedly cheated on US emission tests and was ordered by the Environmental Protection Agency (EPA) to recall nearly half a million cars, according to Fitch Solutions in its latest case study snapshot.

After pricing consistently in line with 'A/A-' levels for the past year, the cost of credit protection on VW's debt has now moved into below-investment grade space.

"Soured market sentiment also seems to be impacting other German auto makers, most notably BMW AG and Daimler AG, with spreads 94% and 77% wider since Monday, respectively," said Diana Allmendinger, Director, Fitch Solutions.

Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings' Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.