The drought of significant events this week finally ends today as the Fed releases the minutes from the April 29-30th policy-setting meeting.  That meeting saw almost zero changes in the FOMC Announcement compared to the March 19th Announcement. 

If the Fed made effectively no changes to the policy statement, it's a fairly logical deduction that the minutes from the meeting from which that statement arose, would probably be uninteresting, or at least not offer any new policy insights.  But just because the statements were very similar the actual meetings don't necessarily have to be.  In addition, the Fed is well within its rights to edit the minutes as it sees fit.  This leaves them the flexibility to focus the Minutes on more timely topics or to respond to changing market conditions.

So what's changed since the April 30th Announcement?  Stocks are a bit worse than sideways and bond markets have rallied handsomely (though not necessarily because of the Fed).  Nothing about those facts should be alarming enough for the Fed to need to drop any bombs with the Minutes, but there are a few clues about a slight course correction.

While we haven't seen any wild market movements that threaten price stability or job creation (not saying either of these are ideal, just that there's been no big news in the past 3 weeks), we have seen several Fed speakers take up the issue of the housing market since then, and with increasing levels of concern.  The Fed Chair herself addressed Housing as her chief concern saying "the recent flattening in housing activity could prove more protracted than currently expected."

Then yesterday, we had Dudley--arguably the second most important Fed speaker at the moment by a wide margin--also indirectly addressing housing.  He did so by saying the committee's 2011 exit strategy (incidentally, something they only laid out in the Minutes!) might need to be revisited.  That strategy said the first step in removing accommodation would be for the Fed to stop reinvesting principal from its portfolio of purchased bonds.  This is a fairly MBS-specific issue as the Treasury portion of Fed holdings is rolled-over on a quarterly basis, while MBS are monthly.

Dudley introduced the notion that the Fed might need to think about raising rates first, before it stops reinvesting principal from its portfolio, as the latter "risks inadvertently bringing forward any tightening of financial conditions."  He also noted that raising rates first would allow more flexibility in responding to market conditions.  Long story short, Dudley is saying maybe the Fed should raise rates before it stops reinvesting monthly MBS income, and that's clearly a net-positive for secondary mortgage market liquidity.

If the Fed discussed this at the meeting, it's not out of the question to consider that Yellen and Dudley's comments are part of a psychological campaign, intentional or otherwise, to ease markets toward the conclusion rather than dropping bombs.  To be sure, it's a long-shot that this is what's about to happen today, but it's also not out of the question.  Beyond that, even if we hear nothing about it today, the fact that Dudley spoke about it so specifically suggests we will hear about it soon.