Financial market stresses ease modestly over previous week

Financial market stresses eased modestly over the previous week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Sept. 13, 2013, the STLFSI measured -0.449, modestly less than the previous week’s value of -0.361. This decrease ended four consecutive weekly increases.

As seen in the chart above, over the past week, three of the 18 indicators that are used to construct the STLFSI increased from the previous week and 11 indicators made a negative contribution. In the previous week, nine indicators made positive contributions. The largest negative contribution (relative to the previous week) was made by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo), followed by the equity market volatility index (VIX) and the expected inflation rate over the next 10 years (BIR_10yr).

The STLFSI rose above its year-earlier value for the second consecutive week. Over the past year, 10 of the 18 components made negative contributions to the index and the remaining eight components made positive contributions to the index, as seen in the chart above. In the previous week, 11 indicators made a negative contribution (relative to the previous year). Over the past year, the two largest contributions to the annual change in the STLFSI were made by the Mlynch_BMVI_1mo and the BIR_10yr.

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