But recent economic data releases provide conflicting signals. The pace of growth in the U.S. services sector fell for a second straight month in August, dropping to its lowest level since May, according to a survey by financial data firm Markit. On the other hand, the Conference Board's index of consumer confidence rose to 92.4 in August, the highest since October 2007.
Growth uncertainty is the precise message that's coming out of TIPS volatility, said Nizam Idris, head of strategy, fixed income and currencies at Macquarie.
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In addition to the mixed bag of economic data, the market is increasingly worried about the economic outlook for Europe and Japan.
"The question is whether the U.S. can ignore the fact that two out of the world's three major economies are in a state of funk and continue growing at a fast pace," he said.
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"The debate now is whether we'll see slower than normal growth in the U.S. or a full blown recovery. I'm in the former camp," he added.
The consequence of this is that the U.S. is likely to hike interest rates at a slower pace and pause at lower levels compared with historical levels, Idris said.