There is the story of a preacher who got up one Sunday and announced to his congregation: "I have good news and bad news. The good news is, we have enough money to pay for our new building program. The bad news is, it's still out there in your pockets."

Yesterday the MBAA mortgage applications survey showed apps last week were +1.1%, with purchases +3.8% and refinances -3.0%. Virtually all market signals, including the record lows for the April, May and June NAHB Housing Market Index, indicate that any significant increase in mortgage-related sales may come from price-cutting on the supply side.

We had some news out this morning. Besides the usual Thursday Jobless Claims (308k), May’s Goods and Services Trade Balance report came out, measuring the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market, but nonetheless came out as expected at a $60 billion deficit. There is some feeling that prices still have some room to rally on expectations that we have not heard the whole story in Sub Prime land and that there may still be more bad news to come. This morning the 10-yr stands at 5.07% and 30-yr A-paper prices are a touch better.

Tomorrow we’ll see Retail Sales (the Commerce Department is expected to say that sales at retail establishments rose 0.3% last month) and the University of Michigan’s Index of Consumer Sentiment preliminary reading for July. It is expected to rise from June’s final reading of 85.3. This would indicate that consumers were more comfortable with their own financial situations this month than last month. Generally, if consumers are confident in their own finances, they are more apt to make large purchases in the near future. Or so the thinking goes. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.