In the beta release, bullets are capable of damaging and breaking any physical entities they come in contact with, such as the player, enemies, weapons, throwables, and even other bullets. A bullet may also be stopped by the shattered remains of a deceased enemy or the remains of a broken weapon/item.
Currently, the only real way to deflect a bullet in mid-air is to use the Katana to slice it while it travels. However, bullets can be deflected simply by clicking on them while bare-handed. This is most likely a bug.