Implied Market Default Probability Using Reduced Form Model

In the context of credit analysis and the valuation of corporate bonds, reduced form models utilize observable market data to assess the default risk of issuers. Consider a corporate issuer, XYZ Corp, which has historically maintained a stable credit rating of BBB. The current yield on its bonds is 6%, while similar-rated bonds yield an average of 8%. The transition matrix for credit ratings indicates a 5% probability of a downgrade to BB and a minimal probability of default over the next year (0.5%).

Given these inputs, what is the implied market default probability for XYZ Corp according to a reduced form model?