Financial market stress remaining relatively constant, according to STLFSI

Financial market stresses were little changed for the second consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Aug. 9, 2013, the STLFSI measured -0.619, slightly lower than the previous week (-0.577), but about equal with the level from two weeks earlier (-0.608).

As seen in the chart above, over the past week, eight of the 18 indicators that are used to construct the STLFSI increased from the previous week, six made negative contributions and four were unchanged. The largest negative contribution was made by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo), followed by inflation expectations over the next 10 years (BIR_10yr). On the other side of the coin, the component that made the largest positive contribution to the STLFSI was the spread between yields on corporate Baa-rated bonds and 10- year Treasury securities (Corp_CRS).

From a longer-term perspective, the STLFSI has been below zero for 60 consecutive weeks. Over the past 52 weeks, 12 of the 18 components made negative contributions to the index, as seen in the chart above. This is the same number reported in the previous two releases. Also, like last week, the two largest negative contributions were made by the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS) and the Corp_CRS. Over the past year, the largest positive contribution was made by the Treasury yield curve (YieldCurve_10yr3mo).

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