“The market could have a little bit of a relief sell-off and little bit of a repricing, but that would be somewhat innocuous,” Murphy said.

Don’t expect much action further out the curve, either. T. Rowe Price fixed-income portfolio manager Chris Brown said if markets are comfortable with the Fed’s messaging -- and even if the G-20 summit stirs optimism on the trade front -- the 10-year yield probably can’t get much higher before buyers step in. The past month’s rallies have carved out a range for the 10-year between 2% and 2.40%, he said.

Release the Doves

It would be tough for the Fed to surpass the market’s expectations, but a rate cut might. As of Monday, pricing reflected only a 16% chance of a 25-basis point reduction at this week’s meeting.

Rewarding these bets would not clear them out, however, according to Loomis’s Stokes. By over-delivering, policy makers would only raise the suspicion that they’re responding to a bigger, undisclosed threat. Futures contracts beyond this year would gain on the prospect of more easing to come, if traders reason that “this doesn’t feel like insurance, this feels like a Fed cycle,” she said.

“If there are expectations that this is the beginning of a more drawn-out easing cycle, the impact on the curve is the most important to look at,” with a more pronounced steepening the most likely outcome, said Amherst Pierpont’s Murphy.

‘Double Jeopardy’

If the Fed doesn’t bend closer to the market’s vision, T. Rowe’s Brown expects a tantrum in three stages. Higher yields is the first and the most fleeting.

“If the Fed comes off as hawkish I think you’ll see a knee-jerk selloff at the front end,” Brown said. That would quickly give way to a bullish move as a meltdown in risk assets drives buying in long-dated Treasuries, in a second wave of curve flattening. The delayed reaction is for the curve to re-steepen, he said, as investors move back into short-dated Treasuries on the conviction that the Fed will have to take emergency action later.

To Murphy of Amherst Pierpont, this is the “double-jeopardy” scenario whereby stock-market volatility exacerbates the recent tightening in financial conditions due to trade policy uncertainty. “Then the market’s really going to force them to do something later in the year,” he said.