Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.
Financial market stress fell for the sixth consecutive week and registered its largest one-week decline thus far this year. For the week ending Feb. 27, 2015, the St. Louis Fed Financial Stress Index (STLFSI) measured -1.045, its lowest level since the week ending Dec. 5, 2014.
Over the past week, 16 of the 18 indicators contributed negatively to the weekly change in the STLFSI, nine more than the previous week. The largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and the yield on corporate Baa-rated bonds (BAA). Two of the 18 indicators contributed positively to the STLFSI, six fewer than the previous week. The largest positive contribution was made by the Libor-OIS yield spread (3-month Libor less three-month overnight index swaps).
Over the past year, 10 of the 18 indicators made a positive contribution to the index, one fewer than the previous week. Like last week, the largest positive contributions over the past year were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the expected inflation rate over the next 10 years (BIR_10yr). Eight indicators made a negative contribution over the past year, one more than last week. The largest negative contribution over the past year was made by the BAA, followed by the yield on 30-year Treasury securities (Treas30y).
For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.
The STLFSI measures the degree of financial stress in the markets and is constructed from 18 weekly data series: seven interest rate series, six yield spreads and five other indicators. Each of these variables captures some aspect of financial stress. Accordingly, as the level of financial stress in the economy changes, the data series are likely to move together.
How to interpret the index
The average value of the index, which begins in late 1993, is designed to be zero. Thus, zero is viewed as representing normal financial market conditions. Values below zero suggest below-average financial market stress, while values above zero suggest above-average financial market stress.
Note that the bar charts plot the change in the contribution from one week to the next or from the current week compared to the value 52 weeks earlier.
FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.