Mortgage Rates Today, Aug. 16, 2024: May Be a Quietly Good Day

In brief

This morning's economic reports are unlikely to move mortgage rates far or for long. At least, they rarely do.

Meanwhile, early signs in bond markets are encouraging. At 4:50 a.m. Eastern, MarketWatch reported, "Bond yields eased Friday after a big move higher following data showing the U.S. economy is unlikely to imminently enter a recession."

As you may know, mortgage rates are largely determined by yields in a bond market, the one in which mortgage-backed securities (MBSs) are traded.

And lower MBS yields almost always mean lower mortgage rates. Fingers crossed that things don't change later in the day.

Investor sentiment moving

The same MarketWatch report we mentioned earlier quoted Ipek Ozkardeskaya, a senior analyst at Swissquote Bank:

"The combination of encouraging economic data and robust Walmart earnings gave hope to investors that the U.S. economy won’t collapse, revived the hope of seeing the U.S. economy soft-land, and eased the jumbo rate-hike bets for the Federal Reserve’s September meeting," he said.

And those bets really have been easing. A week ago, the CME FedWatch tool put the chances of the Fed slashing rates by a half point (50 basis points) at 51%. A quarter-point cut had a 49% chance.

But those odds have changed remarkably. Overnight, they stood at 27.5% for a half-point fall and 72.5% for a quarter-point one.

That's not necessarily a bad thing. Markets price in their expectations ahead of rate announcements (and economic reports).

So, in the event of the Fed opting for a larger cut when it unveils its decision on Sep. 18, mortgage rates will have room to fall, perhaps significantly. The expected rate reduction would likely barely change them. Only a rise (and nobody's expecting one of those) would apply serious upward pressure that day.

Of course, the rate announcement is still 33 days away. And a lot could change over that time. But keeping an eye on market expectations for the Fed decision helps explain a lot about movements in mortgage rates.

Next week

The first three days of next week have no important economic reports scheduled. And we'll brief you next Wednesday on the ones due Thursday.

Of course, that doesn't necessarily mean mortgage rates won't move much in the first half of next week. But the drivers, if any, will likely be existing market momentum (good), shifting investor sentiment (uncertain), and market-moving news stories (wholly unpredictable).

Watch out for a couple of Fed events next week, starting with Wednesday's release of the minutes of the last meeting of its rate-setting body. These tend to move mortgage rates less than they once did, owing to improved transparency on the central bank's part.

In other words, we're already pretty certain what happened at that meeting, and, anyway, much has occurred since. Still, there's always a possibility of surprises.

Then, next Friday, Fed Chair Jerome Powell has a speaking engagement. Wall Street players will hang on his every word as they watch for hints about how big the Sep. 18 rate cut might be.