Why this week’s Fed minutes could hold the key to the market’s next move

It's a big week for the bond market, and the Federal Reserve's latest meeting minutes, set for release Wednesday afternoon, could be a particularly pivotal event for Treasurys.

For one, rates are rising relatively quickly. As the benchmark 10-year Treasury yield inches ever closer to 3 percent, the more Fed policy-sensitive 2-year Treasury yield hit its highest level in nearly a decade. A massive Treasury auction on Tuesday showed weak demand for some short-dated notes.

Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management, is eyeing the Fed meeting minutes on Wednesday as a significant catalyst for bonds. Here are his reasons.

• Bond markets are already feeling the heat ahead of the minutes' release, as the U.S. Treasury auctions off record amounts of short-dated three- and six-month notes at the highest rates for those maturities since 2008.

• If the Federal Open Market Committee meeting minutes are unambiguously hawkish, rates could jump further as Treasury yields are already rising to multiyear highs.

• Hawkish rhetoric from the Fed could, in turn, weigh on the equity market.

• Stocks have managed to shrug off steadily rising rates as of late and have recovered most of their losses from earlier this month, but investors may begin worrying about crowding in the bond market as yields begin competing with stocks.

Bottom line: A hawkish tone out of the FOMC's meeting minutes on Wednesday could push bond yields higher, as rates are already hitting multiyear highs.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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