The Federal Reserve has taken concrete steps to increase transparency surrounding its policy decisions. The most tangible step is the voluntary press conference offered after the Federal Open Market Committee releases its statement, about every six weeks. In her first press conference, new Fed Chair Janet Yellen surprised markets with her unprecedented level of transparency. When asked about the time gap between the conclusion of the Fed’s current asset purchase program and the first policy target rate increase, Yellen suggested “around six months.” The market had expected the first rate increase in late 2015 at the earliest, but Yellen’s quantification puts the first hike sometime in the spring of 2015. The S&P 500 promptly dropped about 1% in the minutes following this remark, and the yield on the ten-year US Treasury note increased about seven basis points. This overreaction was reversed somewhat in the next two trading sessions, but yields remain elevated. SNWAM has mentioned many times in weekly updates our thesis of rising interest rates in 2014 and as recently as late February, we sent around an internal research note assigning a rough probability of 45%-55% that a policy rate increase would take place in the spring of 2015. We were more surprised by how forthcoming Yellen was in her press conference than by the time period she mentioned for the first rate increase. That being said, client portfolios stand to benefit if interest rates climb steadily over the coming years, as current income can be reinvested at progressively higher rates. Increased Fed transparency aids the steadiness of the climb and this augurs well for bond portfolios.