Financial Market Stress Falls for First Time in Three Weeks

The St. Louis Fed Financial Stress Index (STLFSI) fell modestly in the latest reporting week. For the week ending Aug. 15, 2014, the STLFSI measured -1.266, down slightly from the previous week’s revised value of -1.208. Last week’s decline was the first in the past three weeks. Year-to-date, the STLFSI has averaged -1.257, modestly lower than the -1.107 average registered over the same year-to-date period in 2013.

Over the past week, four of the 18 indicators contributed positively to the weekly change in the STLFSI, which was five fewer than the previous week. The largest positive contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the market-based measure of inflation expectations over the next 10 years (BIR_10yr). Eleven of the 18 indicators contributed negatively to the change in the STLFSI over the past week, five more than the previous week. The largest negative contributions over the past week were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and the spread between high-yield corporate bonds and 10-year Treasury securities (HighYield_CRS).

Over the past year, 14 of the 18 indicators contributed negatively to the change in the STLFSI and one indicator contributed positively. For the 12th consecutive week, the largest negative contribution over the past year was made by the Mlynch_BMVI_1mo.

For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.