Financial Market Stress Reaches Three-Year High

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

Financial market stress rose to its highest level in more than three years in the latest reporting week. For the week ending Aug. 21, the index measured -0.808, up sharply from the previous week’s revised value of -0.972 and the highest level since the week ending June 29, 2012. The index has increased for four consecutive weeks. (Normal financial market conditions are represented by zero.)

Over the past week, 11 indicators contributed positively to the weekly change, four more than the previous week. The largest positive weekly contribution was made by the Chicago Board Options Exchange Market Volatility Index (VIX), followed by the yield spread between 3-month commercial paper and 3-month Treasury bills (CPS_3mo) and by the expected inflation rate over the next 10 years (BIR_10yr). Five of the 18 indicators contributed negatively to the weekly change in the index, three fewer than the previous week. The largest negative contributions were made by the yields on 10- and 30-year Treasury securities (Treas10y and Treas30y).

Over the past year, 13 of the 18 indicators made a positive contribution to the index, one more than the previous week. For the fifth consecutive week, the two largest positive contributions over the past year were made by the BIR_10yr and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Five indicators made a negative contribution, one fewer than the previous week. The largest negative contribution was made by the yield on the Treas30y.

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