Financial Market Stress Rises for Sixth Consecutive Week

For the week ending Oct. 10, 2014, the St. Louis Fed Financial Stress Index (STLFSI) measured -1.065. The index rose for the sixth consecutive week and is at its highest level since the week ending Oct. 18, 2013.

Over the past week, eight of the 18 indicators contributed positively to the change in the STLFSI and nine indicators contributed negatively to the change in the STLFSI. Consistent with last week, the STLFSI’s bond and equity market volatility components—the Chicago Board Options Exchange Market Volatility Index (VIX) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo)—made the two largest positive contributions to the weekly change. The next-largest positive contribution was made by the spread between three-month commercial paper and the three-month Treasury bill (CPS_3mo), a measure of the short-term risk premium on corporate debt. The two largest negative contributions were made by the yield on corporate Baa-rated bonds (BAA) and Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII), which both are indicators of below-investment-grade corporate debt.

Over the past year, 11 of the 18 indicators contributed negatively to the change in the STLFSI, two fewer than the previous week. For the 20th consecutive week, the largest negative contribution was made by the Mlynch_BMVI_1mo. Six of the 18 indicators made a positive contribution to the STLFSI over the past year. Consistent with the previous week, the largest positive contribution was made by the inflation expectations indicator (BIR_10yr).

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