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).

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.

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.