Financial market stress eased in the latest reporting week according to the St. Louis Fed’s Financial Stress Index (STLFSI). For the week ending Feb. 14, 2014, the STLFSI measured −0.970, its first decline in four weeks and the largest one-week decline since the week ending Oct. 18, 2013.
Over the past week, 12 of the 18 indicators contributed negatively to the change in the STLFSI, while five contributed positively. In a reversal from the previous week, the STLFSI’s two financial market volatility measures—the Chicago Board Options Exchange Market Volatility Index (VIX) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo)—posted the largest negative contributions. The largest positive contribution over the past week was made by the difference between yields on three-month Treasury bills and three-month Eurodollars (TED spread).
Financial market stress remained above its year-earlier level for the fourth consecutive week. Over the past 52 weeks, 11 of the 18 indicators contributed positively to the change in the STLFSI. The expected inflation rate over the next 10 years (BIR_10yr) once again made the largest positive contribution, followed by the Treasury yield curve (YieldCurve_10yr3mo). Seven of the STLFSI’s components contributed negatively to the index’s change over the past year. The largest negative contribution was accounted for by the spread between Baa-rated corporate bonds and 10-year Treasury securities (Corp_CRS).
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.