Financial Market Stress Falls to Its Lowest Level in Over Seven Years

The St. Louis Fed Financial Stress Index (STLFSI) fell to its lowest level in a little more than seven years. For the week ending May 16, 2014, the STLFSI measured -1.214, down modestly from the previous week’s revised value of -1.194 and its lowest level since the week ending Feb. 23, 2007.

Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the STLFSI. The largest negative contribution was made by the Chicago Board Options Exchange Market Volatility Index (VIX). Six of the 18 indicators contributed positively to the weekly change. The largest positive contribution was accounted for by the yield spread between corporate Baa-rated bonds and 10-year Treasury securities (Corp_CRS).

The STLFSI was below its year-earlier level for the fourth week in the past five weeks. Over the past 52 weeks, 13 of the 18 indicators contributed negatively to the change in the STLFSI, five more than the previous week. For the 20th straight week, the largest negative contribu-tion was made by the Corp_CRS. Over the past year, five indicators contributed positively to the index, five fewer than the previous week. The largest positive contribution to the STLFSI over the past year was made by the expected inflation rate over next 10 years (BIR_10yr).