Carson isn’t the only one taken aback by recent strength in economic data. The Citigroup Economic Surprise Index, a daily gauge of how close analysts get to predicting the actual outcome of economic reports, reached 40.6 on Aug. 15, the highest level of the year. A higher index shows results of the most-recent data are more positive and surprising.
Bond yields began jumping in May when Fed officials started discussing the possibility that monthly bond purchases would be trimmed this year. The Federal Open Market Committee will opt for tapering at the September meeting according to 65 percent of 48 respondents in an Aug. 9-13 Bloomberg survey. The median estimate called for purchases to be cut to $75 billion.
“We haven’t seen the disaster that some had feared and now they can think about tapering,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, and a former Federal Reserve Bank of Richmond economist. “You have the opportunity to pull back. The market is prepared for it.”