St. Louis Fed Financial Stress Index Falls to Lowest Level in Nearly a Year

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

Financial market stress has fallen to its lowest level in nearly a year, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending July 15, the index measured -1.141, down from the previous week’s revised value of -1.044. The latest decline, the fourth in a row, takes the index to its lowest level since the week ending July 31, 2015.

Over the past week, 11 of the 18 indicators contributed negatively to the change in the index, one fewer than in the previous week. The three largest negative contributions were made by: (1) the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury security (HighYield_CRS); (2) the yield on the Merrill Lynch High-Yield Corporate Master II Index (MLynch_HighYld_MasterII); and (3) the Chicago Board Options Exchange Market Volatility Index (VIX). Six of the 18 indicators contributed positively to the weekly change in the index, one more than the previous week. The two largest positive contributions were made by the yield on 10-year Treasury securities (Treas10y) and by the yield on 30-year Treasury securities (Treas30y).

Over the past year, 11 of the 18 indicators made a positive contribution to the index, one more than in the previous week. Seven indicators made a negative contribution to the index, one fewer than in the previous week. The two largest positive contributions over the past year were made by the expected inflation rate over the next 10 years (BIR_10yr) and by the HighYield_CRS. The two largest negative contributions were made by the yield on Baa-rated corporate bonds (BAA) and by Treas30y.

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