Financial Market Stress Rises for Second Consecutive Week


Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.

Financial market stress edged upward for the second consecutive week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending May 8, 2015, the index measured -1.099, up from the previous week’s revised value of -1.211. Thus far in 2015, the index has averaged -1.058, modestly higher than the same period a year earlier (-1.338).

STLFSI Weekly Change graph

Over the past week, 12 of the 18 indicators contributed positively to the weekly change in the index, unchanged from the previous week. The largest positive contribution was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo), followed by the yield on corporate Baa-rated bonds (BAA) and the Chicago Board Options Exchange Market Volatility Index (VIX). Four of the 18 indicators contributed negatively to the STLFSI, also unchanged from the previous week. The largest negative contribution over the past week was made by the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury security (HighYield_CRS).

STLFSI Yearly Change Graph

Over the past year, 11 of the 18 indicators made a positive contribution to the index, and seven indicators made a negative contribution. Both numbers were unchanged from the previous week. The largest positive contribution came from the Mlynch_BMVI_1mo, and the largest negative contribution was made by the S&P 500 Financials Index (SP500_FI). The STLFSI has remained below zero for 186 consecutive weeks. Zero represents normal stress.

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

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The St. Louis Fed Financial Stress Index (STLFSI)

Link to STLFSI in FRED

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.

More information
For additional information on the STLFSI and its construction, see "Measuring Financial Market Stress" and the related appendix.

FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.

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