Bond traders are bracing for more potential turbulence as the Federal Reserve prepares to step back into the fray and fresh data trickles in.

Concerns about the economic fallout from the coronavirus delta variant have seen Treasury market volatility surge, with the ICE BofA Move Index climbing to an almost four-month high this week. Interest rates have dropped, bets on Fed tightening have been pushed back, and there has been a partial unwinding of the massive yield curve flattening that followed the Federal Open Market Committee's (FOMC's) last decision and a stronger-than-anticipated consumer-price inflation reading.

Now, attention will turn to whether anything really has changed for officials as they resume their deliberations on when and how to eventually shave down the central bank's $120 billion per month bond-buying program. The discussion is fraught with potential for comments that investors might interpret hawkishly, and that has some options traders taking out insurance against such a surprise when the FOMC gathering concludes Wednesday. Meanwhile, those looking for the Fed to draw in its horns amid the latest epidemic developments might be disappointed.