For the First Time in Four Weeks, Financial Market Stress Declines

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

Financial market stress declined in the latest reporting week. For the week ending Jan. 29, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.484, down modestly from the previous week’s revised value of -0.343. The decline was the first in four weeks. Over the first five weeks of 2016, the index averaged -0.473, up significantly from its average over the same period last year (-1.093).

Over the past week, 14 of the 18 indicators contributed negatively to the weekly change in the index, seven more than the previous week. The two largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Three of the 18 indicators contributed positively to the weekly change in the index, eight fewer than the previous week. The largest positive contribution was made by the yield spread between Baa-rated corporate bonds and the 10-year U.S. Treasury security (Corp_CRS).

Over the past year, 15 of the 18 indicators made a positive contribution to the index and two indicators made a negative contribution. The largest positive contributions over the past year were made by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) and the yield on Baa-rated corporate bonds (BAA). For the sixth consecutive week, the largest negative contribution over the past year was made by the bond market volatility index (Mlynch_BMVI_1mo).

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