Financial market stresses rise for third consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI)

Financial market stresses remain lower than average, according to the St. Louis Fed Financial Stress Index (STLFSI), but they still rose for the third consecutive week. For the week ending Aug. 30, 2013, the STLFSI measured -0.418, a slight increase from last week’s reading of -0.428.

As seen in the chart above, seven of the 18 indicators that are used to construct the STLFSI increased from the previous week; eight indicators made negative contributions. The two largest negative contributions were made by the corporate Baa-rated bond yield (BAA) and the spread between yields on corporate Baa-rated bonds and 10-year Treasury securities (Corp_CRS). The two largest positive contributions over the past week were made by the equity market volatility index (VIX) and the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS).  

Financial market stresses are modestly less than a year earlier, when the STLFSI measured -0.362 for the week ending Aug. 31, 2012. As seen in the chart above, 12 of the 18 components made negative contributions to the index over the past year, one more than last week. For the third straight week, the largest positive contribution over the past year was registered by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo).

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