January 2022 Credit Market Update:
Pedal to the Metal
The minutes of the December FOMC meeting, released in early January, indicated that the Federal Reserve is considering reducing its balance sheet soon after rate increases begin, potentially even in 2022. The Fed had increased its market support activities during the pandemic, and is currently holding more than $8.3 trillion of Treasury and mortgage-backed securities. Along with short-term rate increases, the sale of these assets would raise long-term rates.