Financial Market Stress Rises Modestly

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

Financial market stress rose modestly in the latest reporting week. For the week ending Dec. 4, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.832, up from the prior week’s revised value of -0.864. Although the index has risen in four of the past five weeks, the STLFSI still indicates that financial market stresses still remain below average (0=normal stress). 

Over the past week, 10 of the 18 indicators contributed positively to the weekly change in the index, five more than in the previous week. The largest positive contributions were made by the yield spread between 3-month commercial paper and the 3-month Treasury bill (CPS_3mo) and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Five of the 18 indicators contributed negatively to the weekly change in the index, six fewer than the prior week. The two largest negative contributions were made by the 3-month Treasury-Eurodollar spread (TED) and by the yield on Baa-rated corporate bonds (BAA).

Over the past year, 13 of the 18 indicators made a positive contribution to the index, unchanged from the previous week. For the third consecutive week, the two largest positive contributions over the past year were made by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) and by the yield differential between that same index and the 10-year Treasury (HighYield_CRS). Two indicators made a negative contribution over the past year, two fewer than the previous week. For the third consecutive week, the largest negative contribution over the past year was made by the J.P. Morgan Emerging Markets Bond Index Plus (EMBI).

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