Financial Market Stress Rises for First Time in Three 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) rose in the week ending July 31 to -1.029, a modest increase from the previous week’s revised value of -1.054.  The increase is the first in three weeks. Year-to-date, the index has averaged -1.081, appreciably higher than the average seen over the comparable period last year (-1.430).

STLFSI Weekly Change graph

Over the past week, 10 of the 18 indicators contributed negatively to the weekly change in the index, and seven indicators contributed positively. (These numbers are unchanged from the previous week.)  The two largest negative contributions were made by the yield differential between 3-month commercial paper and the 3-month Treasury bill (CPS_3mo) and by the so-called TED spread (3-month Treasury-Eurodollar yield spread). The two largest positive contributions were made by the expected inflation rate over the next 10 years (BIR_10yr) and by the High Yield_CRS bond spread, which is the difference between the yield on the Merrill Lynch High-Yield Corporate Master II Index and the yield on the 10-year U.S. Treasury.

STLFSI Yearly Change Graph

Over the past year, 12 of the 18 indicators made a positive contribution to the index, one fewer than the previous week. Six indicators made a negative contribution, one more than the previous week. The two largest positive contributions over the past year were made by the BIR_10yr and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). The two largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and 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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