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Financial market stress increased slightly for the third consecutive week. For the week ending March 21, 2014, the St. Louis Fed Financial Stress Index (STLFSI) measured -1.030, up from a revised -1.042 over the previous week. The STLFSI has registered below-average levels of financial stress (an index less than zero) for 114 consecutive weeks.
Over the past week, 10 of the 18 indicators contributed negatively to the weekly change in the STLFSI, two more than the previous week. For the second consecutive week, STLFSI’s bond and equity market volatility measures moved in opposite directions. However, this time the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) made the largest positive contribution, while the Chicago Board Options Exchange Market Volatility Index (VIX) made the largest negative contribution. In all, six of the 18 indicators contributed positive-ly to the weekly change in the STLFSI.
Financial market stress remains modestly above its year-earlier level for the eighth week in the past nine. Over the past 52 weeks, nine of the 18 indicators contributed positively to the change in the STLFSI, and nine indicators contrib-uted negatively to the index. For the 27th consecutive week, the largest posi-tive contribution over the past year was made by the expected inflation rate over next 10 years (BIR_10yr). Like last week, 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.