Financial Market Stress Falls to Lowest Level in Nine Weeks

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

In the latest reporting week, financial market stress fell to its lowest level since the week ending Aug. 21, 2015, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Oct. 23, the index measured -0.842, down modestly from the previous week’s revised value of -0.787. This was the third consecutive weekly decline.

Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the index, four fewer than the previous week. Like last week, the two largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the Chicago Board Options Exchange Market Volatility Index (VIX). Seven indicators contributed positively to the weekly change in the index, five more than the previous week. For the second consecutive week, the largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr).

Over the past year, 11 of the 18 indicators made a positive contribution to the index, and seven indicators made a negative contribution to the index. These numbers were unchanged from the previous week. For the third consecutive week, the two largest positive contributions over the past year were made by the BIR_10yr and by the yield spread between 10-year Treasury securities and the Baa-rated corporate bonds (Corp_CRS). For the second consecutive week, the two largest negative contributions over the past year were made by the volatility indexes—the Mlynch_BMVI_1mo and the VIX.

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