Financial market stress increased for the second consecutive week according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending March 14, 2014, the STLFSI measured -1.034, up slightly from the previous week.
Over the past week, eight of the 18 indicators contributed negatively to the weekly change in the STLFSI and seven indicators contributed positively. In a departure from the previous week, the STLFSI’s bond and equity market volatility measures moved in opposite directions. The Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) made the largest negative contribution over the past week, while the Chicago Board Options Exchange Market Volatility Index (VIX) made the largest positive contribution.
Financial market stress remains modestly above its year-earlier level. Through the first 11 weeks of 2014, the STLFSI has averaged -1.001; over the first 11 weeks of 2013, the index averaged -1.040. Over the past 52 weeks, 11 of the 18 indicators contributed positively to the change in the STLFSI, the same as the previous week, while seven of 18 indicators contributed negatively to the index. The largest positive contributions over the past year were made by the expected inflation rate over next 10 years (BIR_10yr) and the VIX. The two largest negative contributions were made by the spread between Baa-rated corporate bonds and 10-year Treasury securities (Corp_CRS) and the spread between high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS).
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.