Financial Market Stress Rises for Second Consecutive Week

Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.

The St. Louis Fed Financial Stress Index (STLFSI) remained elevated last week due to widening in high-yield credit risk spreads. For the week ending July 10, the index measured -0.918, a slight increase from the prior week’s revised value of -0.922. (Zero represents normal financial market conditions.)

Over the past week, six of the 18 indicators contributed positively to the weekly change in the index, five fewer than last week. The largest positive contribution was made by the index’s high-yield credit risk spread (HighYield_CRS), as the yield on risky assets increased relative to the safer U.S. 10-year Treasury security. The 10-year breakeven inflation rate (BIR_10yr) made the second-largest positive contribution. Eleven indicators contributed negatively to the weekly change in the index, seven more than the previous week. The largest negative contributions were made by the 3-month commercial paper spread (CPS_3mo) and the yield on Baa-rated corporate bonds (BAA).

Over the past year, 14 of the 18 indicators made a positive contribution to the index and four indicators made a negative contribution. For the 11th consecutive week, the largest positive contribution over the past year was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). For the 10th consecutive week, the largest negative contribution over the past year was made by the S&P 500 Financials Index (SP500_FI).

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