Financial market stresses eased for the third consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Sept. 27, 2013, the STLFSI measured -0.615, which was its lowest level since the week ending Aug. 9, 2013.
As seen in the chart above, over the past week, eight of the 18 indicators contributed negatively to the weekly change in the STLFSI, while seven indicators made positive contributions. For the third consecutive week, the largest negative contribution to the STLFSI (relative to the previous week) was made by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo). The yield on the Baa-rated corporate bond (BAA) made the second largest negative contribution. 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 U.S. Treasury securities (HighYield_CRS).
The STLFSI fell below its year-earlier level for the first time in four weeks. A year earlier, the index measured -0.606. Over the past year, 11 of the 18 components have made negative contributions to the index. The two largest negative contributions over the past year were made by the HighYield_CRS and the spread between yields on Baa-rated corporate bonds and 10-year Treasury securities (Corp_CRS). Compared with a year earlier, seven indicators have contributed positively to the index; the two largest have been the expected inflation rate over the next 10 years (BIR_10yr) and the Mlynch_BMVI_1mo.
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.