Financial Market Stress Falls for Third Straight Week

The St. Louis Fed Financial Stress Index (STLFSI) fell for the third straight week. For the week ending May 23, 2014, the STLFSI measured -1.228, down modestly from the previous week’s revised value of -1.223. The STLFSI remained at 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 same number as the previous week. The largest negative contribution was made by the yield spread between 3-month commercial paper and 3-month Treasury bills (CPS_3mo), followed by the Chicago Board Options Exchange Market Volatility Index (VIX). Six of the 18 indicators contributed positively to the weekly change—also unchanged from the previous week. The largest positive contribution was accounted for by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo).

The STLFSI was below its year-earlier level for the fifth week out of the past six. Over the past 52 weeks, 13 of the 18 indicators contributed negatively to the change in the STLFSI, unchanged from the previous week. The largest negative contribution was made by the yield spread between corporate Baa-rated bonds and 10-year Treasury securities (Corp_CRS). Over the past year, two indicators contributed positively to the index, three 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). The STLFSI has been below zero for 125 consecutive weeks.