Financial Market Stress at Highest Since September 2013

Financial market stress increased for the third consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Jan. 16, 2015, the STLFSI measured -0.807, its highest level since the week ending Sept. 6, 2013. The STLFSI has risen in six of the past seven weeks.

Over the past week, eight of the 18 indicators contributed positively to the weekly change in the STLFSI, which was one fewer than the previous week. The largest positive contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX), the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the expected inflation rate over the next 10 years (BIR_10yr). Nine indicators made negative contributions to the STLFSI over the past week, which was one more than the previous week. For the third straight week, the largest negative contribution was made by the yield on corporate Baa-rated bonds (BAA).

Over the past year, 10 of the 18 indicators made a positive contribution to the index and eight indicators made a negative contribution. These numbers were unchanged from the previous week. Over the past year, the largest positive contribution was made by the BIR_10yr and the largest negative contribution was made by the BAA.

For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.