At the height of the pandemic shock, for example, in March 2020, liquidity conditions deteriorated sharply in the US Treasury market, as demand for bonds outpaced supply due to a dash for cash, giving rise to disruptive market dynamics and drastic price swings.
However, the euro area as a currency union with sovereign states faces specific risk factors that may spur multiple equilibria and self-fulfilling market dynamics. One of these factors is redenomination risk. Markets at times assigned a positive probability to the risk of exit of a euro area member country from the single currency. Another factor is financial contagion.