Financial Market Stress Falls for Third Consecutive Week

Financial market stress fell for the third consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Nov. 7, 2014, the STLFSI measured -1.137, down modestly from the previous week’s revised value of -1.105.  The index is at its lowest level since the week ending Sept. 26, 2014.

Over the past week, eight of the 18 indicators contributed positively to the change in the STLFSI, two more than the previous week. The yield on the Merrill Lynch Asset-Backed BBB-rated security (Mlynch_BBBAA) made the largest positive contribution. Six of the 18 indicators contributed negatively to the change in the STLFSI, which was three fewer than the previous week. The STLFSI’s bond and equity market volatility components—the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the Chicago Board Options Exchange Market Volatility Index (VIX)—made the two largest negative contributions to the weekly change in the index, followed by the expected inflation rate over the next 10 years (BIR_10yr).

Over the past year, eight of the 18 indicators contributed positively to the change in the STLFSI and nine of the 18 indicators made a negative contribution to the index. The largest positive contribution was made by the BIR_10yr, and the largest negative contribution was made by the yield on the Baa-rated corporate bond (BAA).

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