When the Fed minutes were announced yesterday, risk assets took them as doveish on inflation and suggestive of QE. My QE trade rallied, except for treasuries, which dropped because of a suggestion in the minutes that the Fed might focus on nominal GDP growth rather than inflation in deciding whether to go on with QE — which is mildly positive for future inflation.
I am torn about whether to close the trade or not. With the trend in place and less than 1ATR of profit, the bias must be towards keeping it, and the hope that further QE will create the conditions for higher inflation has been part of the story from the start and has not stopped Treasuries from rallying. I do feel cautious, however — the market could now focus on this aspect of the story.
Here is a chart: