The Fed's open market operations can change the money supply, which can affect the risk-free rate offered on bonds.

Why might the Fed's policy also affect the risk premium on corporate bonds?

The risk premium on corporate bonds is the difference between the yield on corporate bond and the yield on government bonds of the same maturity, i.e.,

• corporate bond risk premium = corporate bond yield - government bond yield

With open market operations, the Fed changes the supply or demand for government bonds, and consequently the government bond yield also changes so will the corporate bond risk premium. Open market operations are often a "signal" from the Fed about what it expects in the future. The Fed is buying bonds as a response to Covid because it expects the economy will need stimulation. This increases the money supply and drives the risk free rate lower. The poor outlook will drive the corporate bond risk premium higher.