St. Louis Fed Financial Stress Index (STLFSI) rises slightly, but still below average

Financial market stresses rose slightly over the past week according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Aug. 16, 2013, the STLFSI measured -0.555, slightly above the previous week (-0.625), but about unchanged from four weeks earlier (-0.549).

As seen in the chart above, nine of the 18 indicators that are used to construct the STLFSI increased from the previous week, seven made negative contributions and two were unchanged. In contrast with the previous week, the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo) accounted for the largest positive contribution to this week’s change (it was the largest negative contribution in the previous week). The next-largest positive contribution was made by the breakeven inflation rate (BIR_10yr), which measures inflation expectations over the next 10 years. The largest negative contribution was made by the difference between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS).

The STLFSI has remained below zero for 61 consecutive weeks. As seen in the chart above, 12 of the 18 components made negative contributions to the index over the past year. This same observation also held true for last week’s numbers. Once again, the spread between yields on corporate Baa-rated bonds and 10-year Treasury securities (Corp_CRS) made the largest negative contribution over the past 52 weeks.

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