Federal Reserve May Be About To Send Treasury Yields FlyingAuthor: Paul SheaLast Updated: May 12, 2020 On Wednesday the Federal Reserve of the United States is set to release its latest meeting minutes. Traders are worried that the document will outline a hawkish tone shift at the central bank. That could have a depressing effect on both the stock market and the yield on US Treasuries.At time of writing markets were not really feeling the heat. Some of the more highly valued stocks on Wall Street were falling on Wednesday, but the overall market was relatively flat. Meanwhile US Treasury markets were also showing little signs of a big effect. That may be a sign that hawkish Fed moves are already priced into the market.Looking forward to the Fed minutesThe Fed minutes are set for release at 2 p.m. ET. Traders will be looking for signs that the central bank is thinking about moving its rate changes forward. Right now the market consensus appears to be that the bank won’t make its big move until September, if at all. CNBC reports that the market is pricing in about a 50 percent probability of a third 2017 rate hike.That consensus could change if Fed chair Janet Yellen and the rest of her team strike a defiant note on inflation. Though measures of core inflation have been low, San Francisco Federal Reserve Bank President John Williams has stated that this is because of one off changes in pricing.Speaking to press in Australia, he said that areas affected by one off changes include things like wireless bills and prescription drugs.Aside from inflation, traders will be watching for any indication that the Fed intends to start selling the securities it’s holding on its balance sheet. The market is expecting the bank to approach that issue conservatively, pausing its rate hikes while it sells off some of those securities. Any change on that front could bring a correction to the market.Sounding caution as Fed heads for changeWe don’t know how Federal Reserve policy is going to proceed through the coming year, but we may be in for some real instability. Janet Yellen, the current chair, will finish her term early next year. President Donald Trump, who has the power to nominate the next chair, hasn’t been clear on what his real plans are for the future.He has criticized Yellen for her policy on a number of fronts over the past twelve months, but he has also stated that there is some chance she would be allowed to stay on.Given some of the reportedly fuzzy notions that President Trump has about monetary policy, and the problems he has had in nominating people for other positions, the selection of the next chair of the bank could indeed be very interesting.Yellen will begin her bi-annual report to congress on July 12th. In that testimony we will be able to see more about how the Fed is treating the most recent economic data. For those with big exposure to the Fed in their portfolios, i.e. anyone with investments on planet earth, the next six months could bring a good deal of unpredictability.