Financial Market Stress Reaches Highest Level in 25 Weeks

The St. Louis Fed Financial Stress Index (STLFSI) rose modestly for the second consecutive week. For the week ending Sept. 12, 2014, the STLFSI measured -1.222, up from the previous week’s revised value of -1.289, reaching its highest level since the week ending March 21, 2014.

Over the past week, 14 of the 18 indicators contributed positively to the change in the STLFSI, three more than the previous week. The largest positive contribution was made by the market-based measure of inflation expectations over the next 10 years (BIR_10yr), followed by the Merrill Lynch High-Yield corporate bond rate (Mlynch_HighYld_MasterII), and the Chicago Board Options Exchange Market Volatility Index (VIX). Only one of the 18 indicators contributed negatively to the change in the STLFSI over the past week. The lone negative contribution was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo).

Over the past year, 14 of the 18 indicators contributed negatively to the change in the STLFSI, which was one fewer than the previous week. For the 16^th consecutive week, the largest negative contribution was made by the Mlynch_BMVI_1mo. Three of the 18 indicators made a positive contribution to the STLFSI over the past year. The spread between the Merrill Lynch High-Yield corporate bond rate and the 10-year Treasury bond rate (HighYield_CRS) made the largest positive contribution to the STLFSI over the past year.

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