Council on Foreign Relations' Rebecca Patterson on dysfunction in the treasury markets

• The market is increasingly recognizing the cumulative and broad supply chain risks from the conflict, affecting diverse goods from aluminum alloy (25% through the strait) to helium for semiconductors.
• Concerns are rising about potential dysfunction in the U.S. Treasury market, which could necessitate Fed intervention to ensure smooth market functioning, similar to the UK in 2022.
• Governments face limited fiscal room to maneuver due to existing budget deficits, restricting their ability to provide significant policy responses.

Rebecca Patterson discusses the escalating market concerns stemming from the ongoing conflict, emphasizing the cumulative and broad impact of supply chain disruptions on various industries, including aluminum, fertilizer, and semiconductors. She warns of potential dysfunction in the U.S. Treasury market, which could force the Fed to intervene with liquidity, even amidst a tightening monetary policy, and notes governments' limited fiscal maneuverability.