Rewards abound as we slowly emerge from the pandemic. Those with a vaccinated seal of approval can remove their masks outside and even receive a free donut at Krispy Kreme. Fresh air, surviving 2020 and a sugar high—talk about incentives! The Federal Reserve is rewarding the markets with new inventory to trade. While the Federal Reserve may not be handing out free donuts, it is selling its portfolio of investment grade corporate bonds.
On June 2, 2021, the Federal Reserve issued a press release with its plans to “begin winding down the portfolio of the Secondary Market Corporate Credit Facility.” This facility was one of many corporate credit facilities the Federal Reserve created during the pandemic. The government stepped in at the right time with an emergency lending facility for newly issued corporate debt and existing corporate debt.