Financial Market Stress Falls for Second Consecutive Week

The St. Louis Fed Financial Stress Index (STLFSI) fell modestly for the second consecutive week. For the week ending Aug. 22, 2014, the STLFSI measured -1.291, down slightly from the previous week’s revised value of -1.273. The STLFSI has been below zero for 141 consecutive weeks. The STLFSI remained below zero for 207 consecutive weeks from August 2003 to August 2007.

Over the past week, seven of the 18 indicators contributed positively to the weekly change in the STLFSI, which was three more than the previous week. The largest positive contributions were made by the market-based measure of inflation expectations over the next 10 years (BIR_10yr) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Eight of the 18 indicators contributed negatively to the change in the STLFSI over the past week, three fewer than the previous week. Like the previous week, the two 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, 15 of the 18 indicators contributed negatively to the change in the STLFSI, which was one more than last week, and one indicator contributed positively. For the 13th consecutive week, the largest negative contribution over the past year was made by the Mlynch_BMVI_1mo. The next largest negative contribution was made by the yield on Baa-rated corporate bonds (BAA).

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