Financial Market Stress Declines


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) decreased last week as financial market volatility returned to more stable levels. For the week ending July 17, the index measured  -1.029, a decline of 0.107 basis points from the prior week’s revised value of -0.922.

STLFSI Weekly Change graph

Over the past week, seven of the 18 indicators contributed negatively to the weekly change in the index, four fewer than last week. The two largest negative contributions were made by the index’s measures of stock and bond market volatility: the Chicago Board Options Exchange Market Volatility Index (VIX) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). Ten indicators contributed positively to the weekly change in the index, four more than the previous week. The largest positive contributions were made by the yield on Baa-rated corporate bonds (BAA) and the 3-month commercial paper spread (CPS_3mo).

STLFSI Yearly Change Graph

Over the past year, 13 of the 18 indicators made a positive contribution to the index and five indicators made a negative contribution. For the 12th consecutive week, the largest positive contribution over the past year was made by the Mlynch_BMVI_1mo. For the 11th 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.