Financial market stress reaches its lowest level in six months

For the week ending Nov. 22, 2013, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.846, its lowest level since the week ending May 24, 2013. Last week’s decline was the sixth in the past seven weeks. The STLFSI has been below zero for 75 consecutive weeks.

Over the past week, 12 of the 18 indicators contributed negatively to the change in the STLFSI, two con-tributed positively and four indica-tors were unchanged from the pre-vious week. The two largest nega-tive contributions were made by the Merrill Lynch High-Yield Corpo-rate Master II Index (Mlynch_HighYld_MasterII) and the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS). The largest pos-itive contribution over the past week was accounted for by the equity market volatility index (VIX).

For the third week in a row, 12 of the 18 indicators contributed nega-tively to the change in the STLFSI over the past year. For the fourth consecutive week, the largest nega-tive contribution was made by the HighYield_CRS. As seen in the chart, this contribution was more than twice as large as the next-largest negative contribution (equity prices, SP500_FI). For the 10th consecutive week, the largest positive contribution to the STLFSI over the past year was made by the expected inflation rate over the next 1 0 years (BIR_10yr).

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