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®.

The St. Louis Fed Financial Stress Index (STLFSI) remained elevated last week due to widening in high-yield credit risk spreads. For the week ending July 10, the index measured -0.918, a slight increase from the prior week’s revised value of -0.922. (Zero represents normal financial market conditions.)

STLFSI Weekly Change graph

Over the past week, six of the 18 indicators contributed positively to the weekly change in the index, five fewer than last week. The largest positive contribution was made by the index’s high-yield credit risk spread (HighYield_CRS), as the yield on risky assets increased relative to the safer U.S. 10-year Treasury security. The 10-year breakeven inflation rate (BIR_10yr) made the second-largest positive contribution. Eleven indicators contributed negatively to the weekly change in the index, seven more than the previous week. The largest negative contributions were made by the 3-month commercial paper spread (CPS_3mo) and the yield on Baa-rated corporate bonds (BAA).

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. For the 11th consecutive week, the largest positive contribution over the past year was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). For the 10th consecutive week, the largest negative contribution over the past year 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.