Financial market stress declines for fifth week out of past six

Financial market stress remained below average in the latest reporting week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Jan. 17, 2014, the STLFSI measured −1.013, modestly less than the previous week’s value of −0.958. The index declined for the fifth week out of the past six weeks.

Over the past week, nine of the 18 indicators contributed positively to the change in the STLFSI, while eight indicators contributed negatively to the index’s change. The expected inflation rate over the next 10 years (BIR_10yr) made the largest positive contribution, while the Merrill Lynch bond market volatility index (Mlynch_BMVI_1mo) made the largest negative contribution.

Financial market stress remained below its level from a year earlier for the fifth straight week. Over the past 52 weeks, 11 of the 18 indicators contributed negatively to the change in the STLFSI, the same number as in the previous two weeks. For the third consecutive week, the largest negative contribution over the past year was made by the spread between Baa-rated corporate bonds and 10-year Treasury securities (Corp_CRS). Once again, the BIR_10yr registered the largest positive contribution over the past year.

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