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Financial market stress edged lower over the past week, more than reversing the previous week’s slight increase. For the week ending Nov. 15, 2013, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.820, its lowest level since the week ending May 24, 2013.
Over the past week, 11 of the 18 indicators contributed negatively to the change in the STLFSI. The largest negative contributions were made by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo), followed closely by the equity market volatility index (VIX). Six of the 18 indicators made positive contributions. The largest positive contribution was made by the yield on Baa-rated corporate bonds (BAA).
Like last week, 12 of the 18 indicators contributed negatively to the change in the STLFSI over the past 52 weeks. For the third consecutive week the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS) made the largest negative contribution measured from a year earlier. Similarly, for the ninth consecutive week, the largest positive contribution to the STLFSI over the past year was made by the expected inflation rate over the next 10 years (BIR_10yr).
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.