Financial Market Stress Declines for Second Consecutive Week


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) has declined for the second consecutive week. For the week ending June 26, the index measured -1.053, a modest decline from the previous week’s revised value of -1.024.  The latest reading is the lowest in four weeks.

STLFSI Weekly Change graph

Over the past week, seven of the 18 indicators contributed positively to the weekly change in the index, one more than the prior week. The largest positive contributions were made by the yield on corporate Baa-rated bonds (BAA) and the yield on 30-year U.S. Treasury securities (Treas30y). Ten indicators contributed negatively to the weekly change in the index, unchanged from the previous week. The largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and 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, both numbers unchanged from the prior week. Like the previous two weeks, the largest positive contributions over the past year were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the BIR_10yr. Also like the previous two weeks, 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.