Financial market stress edged lower over the past week. For the week ending Oct. 18, 2013, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.686, its lowest level in two and a half months. The STLFSI has been below zero for 70 consecutive weeks.
As seen in the chart above, relative to the past week, 13 of the 18 indicators contributed negatively to the change in the STLFSI, the same number reported a week earlier. Compared with the previous week, the largest negative contribution was made by the equity market volatility index (VIX), followed by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo). The largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr).
The STLFSI remained modestly above its year-earlier level for the third consecutive week. Over the past 52 weeks, 12 of the 18 indicators contributed negatively to the change in the STLFSI. For the fourth consecutive week, the spread between yields on high-yield corporate bonds and 10-year U.S. Treasury securities (HighYield_CRS) made the largest negative contribution to the STLFSI over the past year. The largest positive contribution was made by the BIR_10yr.
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.