Financial market stress rises modestly

Financial market stress rose modestly in the latest reporting week according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Jan. 24, 2014, the STLFSI measured -0.963, up modestly from the previous week’s value of -1.021. Through the first four reporting weeks of 2014, the STLFSI has averaged -0.969, which is about unchanged from the same four-week period last year (-0.953).

Over the past week, nine of the 18 indicators contributed positively to the change in the STLFSI, which is the same as the previous week. The Chicago Board Options Exchange Market Volatility Index (VIX) made the largest positive contribution. Of the six indicators registering a negative contribution over the past week, the largest was made by the yield on Baa-rated corporate bonds (BAA).

Financial market stress inched above its year-earlier level for the first time in six weeks. Over the past 52 weeks, 10 of the 18 indicators contributed negatively to the change in the STLFSI. For the fourth 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). For the 19th consecutive week, the expected inflation rate over the next 10 years (BIR_10yr) made the largest positive contribution over the past year.

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