One of the first pieces of news that drove stock and bond prices lower in early 2022 was the release of minutes from the Federal Reserve’s policy-setting meeting in December. They showed a Fed that was moving toward lifting interest rates and combating inflation much more seriously.

Next Wednesday, minutes from the March meeting will be released and could contain critical information about the Fed’s plans for monetary policy.

The minutes may also provide insight into the central bank’s thinking around reducing its bond holdings, which were accumulated as part of an effort to keep yields low during the recession. Fed chair Jerome Powell has indicated that the bank’s balance sheet will be reduced--an action referred to as quantitative tightening or QT--but he has provided little detail. This may give some clues on the timing of QT, and at what speed the Fed will roll down its holdings.

QT will be most relevant in the bond market. News on QT “could prompt rates to rise on Treasuries and mortgages, which would raise the cost of future spending and growth,” Preston Caldwell, chief economist, says. “It’s difficult to know what is priced already [in the market] versus what is not. The bottom line is this is another thing that is no longer accommodating.”

Last month, the Fed lifted the federal-funds rate by a quarter of a point, seeking to rein in inflation running at a roughly four-decade-high level.

Varying inflation expectations and forecasts of pace of Fed tightening have been underlying the bond market’s worst loss in years. Bonds had sold off after Powell signaled mid-March that the Fed would take a more aggressive path in raising its benchmark borrowing cost. Markets now price a 75% shot that the Fed raises by a half in May.

The plunge in bonds lifted yields on the US Treasury two-year note above those of the 10-year in the past week, a phenomenon known as an inverted yield curve. An inverted yield curve is frequently seen as a harbinger of potential recession, and also eats into bank profits.