Stocks are modestly higher and Mortgage Bonds are struggling. The President gave his State of the Union address last night and promoted policies that some in the Bond market are viewing as inflationary. Specifically, a 20% + rise in the minimum wage, bringing it to a federally mandated $9 per hour. The Bond market is always concerned with inflation, and inflation from wages is a cost that typically gets passed onto the consumer. Retail Sales were up just 0.1%, and while this was in line with expectations, it’s still lackluster. Bond prices have crashed right through the floor of support at 102.875 this morning. The next support level is at 102.375 - about 30 BP beneath present levels (see chart below). Until Stocks show signs of weakness, the trend in Mortgage Bond pricing should remain lower.