I have flown several Boeing types and when I changed to the 737 this behaviour confused me too. The VNAV error bar can also be misleading under these circumstances.
The behaviour I find more concerning though, is when altitude intervention is pressed before TOD and the aircraft commences descent at 1000fpm before intercepting the path from below, the FMA is VNAV PATH. Other Boeing aircraft would annunciate VNAV SPD. It is not on the VNAV path, it is below it. I find this FMA misleading.
That’s not to say I don’t enjoy flying it, mind you.