Since the U.S. Federal Reserve Bank has begun gradually unwinding its $4.5 trillion balance sheet, investors are anxious to see how credit markets will react to the end of U.S. quantitative easing and the dawn of tighter monetary policy. This paper tests if corporate credit markets are behaving differently now that the total stock of assets on the Federal Reserve's balance sheet is declining; the research employs a sum of leastsquares time series regression that aims to measure the causal

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... onship between Federal Reserve assets and three different corporate credit spreads (investment grade, BBB and high yield) before and after the policy change. The results indicate that the basic correlation between Federal Reserve assets and corporate credit spreads is altered by the policy change. However, when controlling for other explanatory variables, the analysis shows that the causal relationship remains unchanged. This paper therefore concludes that there are stronger explanatory forces that are keeping corporate credit spreads low despite declining Federal Reserve assets.