Financial Market Stress Rises Slightly

Financial market stress increased slightly in the latest reporting week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Jan. 2, 2015, the STLFSI measured -0.954, up from the previous week’s revised value of -0.994. The STLFSI has increased in four of the past five weeks, after falling in five of the previous six weeks (from the week ending Oct. 24, 2014, to the week ending Nov. 28, 2014).

Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the STLFSI, unchanged from the previous week. The largest negative contribution was made by the yield on corporate Baa-rated bonds (BAA). Over the past week, seven indicators made positive contributions to the STLFSI, one fewer than the previous week. The largest positive contribution was made by the Chicago Board Options Exchange Market Volatility Index (VIX).

Over the past year, nine of the 18 indicators made a positive contribution to the index and nine of the indicators made a negative contribution to the change in the STLFSI. The largest positive contribution was made by the expected inflation rate over the next 10 years (BIR_10yr), followed by the yield spread between the Merrill Lynch High-Yield Corporate Master II index and the 10-year Treasury security (HighYield_CRS). The largest negative contribution over the past year was made by the BAA, followed by the yield on the 30-year Treasury security (Treas30y).

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