We already know that tapering has wrapped up as of last week and that the Fed will continue to reinvest proceeds from the existing bond portfolio until it begins capping those reinvestment amounts.  The timing of those caps (i.e. balance sheet normalization) will be a hot topic in today's press conference though we're still probably several months from an actual announcement. 

Perhaps even hotter will be the market's reaction to the Fed's updated rate hike outlook (via the "dots" released concurrently with the policy statement at 2pm ET).  Is the Fed thinking it needs to hike slower due to global growth implications from the Ukraine war, or that it needs to hike faster due to inflation implications from the Ukraine war?  The fact that either question is viable means there's a wide spectrum of red/green possibilities by this afternoon.

Either way, we can see that bonds are a bit nervous heading into this one.  Yields have been rising over the past 3 session even as inflation expectations have given them permission to cool down.

In other words, the blue line would be following the orange line lower if bonds were exclusively focused on the inflation impact associated with the Ukraine war.  That said, we can also consider the complicated relationship between oil prices, bond yields, and de-escalation hopes.  This goes back to the "no win" situation for bonds where they lose ground due to inflation if the war gets worse and they lose ground due to an evaporation of the safe haven bid if the war gets better.  The past 2 weeks have arguably seen both oil prices and bond yields reflecting de-escalation hopes.