Financial market stress declined for the second consecutive week according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Feb. 21, 2014, the STLFSI measured -0.981, a modest decline from the previous week’s measure of -0.978. Financial market stress remained below zero for the 110th consecutive week.
Over the past week, eight of the 18 in-dicators contributed negatively to the change in the STLFSI, which was four less than a week earlier. The Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) made the largest negative contribution over the past week, followed by the spread between yields on high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS). Six of the 18 indicators made positive contributions over the past week. The largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr); the next-largest positive contribution was made by the Chicago Board Options Exchange Market Volatility Index (VIX).
Financial market stress was above its year-earlier level for the fifth consecu-tive week. Over the past 52 weeks, 10 of the 18 indicators contributed positively to the change in the STLFSI and eight contributed negatively. The largest positive contribution over the past year was made by the BIR_10yr, while the largest negative contribution was made 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.