Treasury Secretary Janet Yellen said that while the U.S. financial system remains resilient, the current backdrop has created the conditions where risks to its stability could appear.

This is a “dangerous and volatile environment” for the global economy, including the surge in energy prices and increased volatility in financial markets, Yellen said in answering questions after a speech in New York Monday. It’s an environment in which “financial stability risks could materialize” in the U.S., she said.

Recent weeks have seen a major selloff in U.K. government bonds that forced the Bank of England into emergency purchases, and a tumble in the yen that’s prompted repeated intervention by Japan in the foreign-exchange market.

“To date, the U.S. financial system has not been a source of economic instability,” Yellen said in her speech to the annual meeting of the Securities Industry and Financial Markets Association. “While we continue to watch for emerging risks, our system remains resilient and continues to operate well through uncertainties.”

Trading in Treasuries — the world’s benchmark government debt market — has been robust, Yellen said, though she highlighted past episodes of stress and noted continuing work to improve its functioning. The Treasury is “very focused” on the issue, she said in answering a question.

Yellen also flagged the risk of strains stemming from private credit.

“We are also attentive to the possibility that higher market volatility could expose vulnerabilities in nonbank financial intermediation,” the Treasury chief said. “Regulators have been working together to better monitor leverage in private funds and develop policies to reduce the first-mover advantage that could lead to investor runs in money market funds and open-end bond funds.”

As for Treasuries, Yellen’s comments marked the second time this month that she acknowledged concerns over the functioning of the $23.7 trillion market.

Read More: Yellen Worries Over Loss of ‘Adequate Liquidity’ in Treasuries

The market-making capacity or willingness of large banks has failed in recent years to keep pace with that market’s expansion. That’s reduced liquidity, leaving Treasuries vulnerable in times of stress.

For example, in March 2020 at the outset of the COVID-19 pandemic, the Fed was forced to supply emergency liquidity as investors fled for cash.

“In the past few years, we have seen some episodes of stress in this critical market,” she said. “These episodes underscore the importance of enhancing its resilience.”

Despite that, Yellen said, trading volumes remained “robust,” and investors were able to execute trades in Treasuries.

She said her department’s staff was “working with financial regulators to advance reforms that improve the Treasury market’s ability to absorb shocks and disruptions, rather than to amplify them.”

Treasury officials have been studying the issue for years, and are currently working on a proposal to boost transparency surrounding specific trades in the market.

Options under consideration include more central clearing. Many of the market-making financial institutions, meanwhile, would prefer an easing of regulatory constraints overseen by the Fed that force banks to set aside capital when they hold Treasuries on their balance sheet.