Financial market stress rises modestly for the second consecutive week

Financial market stress rose modestly for the second consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Dec. 6, 2013, the STLFSI measured -0.775, up from a reading of -0.852 in the previous week and its highest level since the week ending Oct. 18, 2013.

Over the past week, 10 of the 18 indicators contributed positively to the change in the STLFSI; this was one more than reported in last week’s release. For the second consecutive week, the largest positive contribution was made by the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo). Of the six indicators that registered negative contributions over the previous week, the largest contribution was made by the spread between Baa-rated corporate bonds and 10-year Treasury securities (Corp_CRS).

For the first time in seven weeks, the STLFSI rose above its value from 52 weeks earlier. Nonetheless, financial market stress remained below average (zero) for the 98th consecutive week. Over the past year, 11 of the 18 indicators contributed negatively to the change in the STLFSI, one less than in the previous week. For the sixth consecutive week, the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS) made the largest negative contribution to the STLFSI. Compared with a year earlier, the largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr), followed by the Mlynch_BMVI_1mo.

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