Financial Market Stress Declines for First Time in Eight Weeks


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

The St. Louis Fed Financial Stress Index (STLFSI) measured -1.020 for the week ending June 19, down slightly from the previous week’s revised value of -1.012. Last week’s decline was the first since the week ending April 24, 2015. Year to date, the index has averaged -1.078, up markedly from its average of -1.391 over the same period last year.

For the week ending June 19, six of the 18 indicators contributed positively to the weekly change in the index, six fewer than the previous week. The two largest positive contributions were made by the yield spread between corporate Baa-rated bonds and the 10-year U.S. Treasury security (Corp_CRS) and by the Chicago Board Options Exchange Market Volatility Index (VIX). Ten indicators contributed negatively to the weekly change in the index, five more than the previous week. The largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and by the expected inflation rate over the next 10 years (BIR_10yr).

STLFSI Yearly Change Graph

Over the past year, 14 of the 18 indicators made a positive contribution to the index and four indicators made a negative contribution. The two largest positive contributions over the past year were made by the Mlynch_BMVI_1mo and by the BIR_10yr. The largest negative contribution was made by the S&P 500 Financials Index (SP500_FI).

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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