After Three Weeks of Decline, Financial Market Stress Inches Up

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

Financial market stress rose slightly in the latest reporting week, following three consecutive weeks of decline. For the week ending Sept. 25, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.685, up slightly from the previous week’s revised value of -0.719.     Year-to-date, the index has averaged -1.036, appreciably higher than its average for  the comparable period last year, which was -1.445. (Zero is viewed as representing normal financial market stress.)

Over the past week, 10 of the 18 indicators contributed positively to the weekly change in the index, one fewer than the previous week. The two largest positive weekly contributions were made by the interest-rate differential between the Merrill Lynch High-Yield Corporate Master II Index and the yield on 10-year U.S. Treasury securities (HighYield_CRS) and by the expected inflation rate over the next 10 years (BIR_10yr). Six indicators made a negative contribution over the past week, one more than the previous week. The largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the yield on Baa-rated corporate bonds (BAA).

Over the past year, 15 of the 18 indicators made a positive contribution to the index, two more than the previous week. The two largest positive contributions over the past year were made by the BIR_10yr and by the Chicago Board Options Exchange Market Volatility Index (VIX). Three indicators made a negative contribution, two fewer than the previous week. The largest negative contributions were made by the yield on 10-year Treasury securities (Treas10y) and by the yield on 30-year Treasury securities (Treas30y).

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