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 risen for the second consecutive week. For the week ending Aug. 7, the index measured -0.989, up modestly from the previous week’s revised value of -1.033. The index has risen in 11 of the 16 weeks since the week ending April 24, when it dropped to -1.286, the lowest point since last November.
Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the index, one fewer than the previous week. The largest negative contributions were made by the yield spread between the 3-month Libor and the overnight index swap rate (LiborOIS_3mo) and by the yield on Baa-rated corporate bonds (BAA). Eight indicators contributed positively to the weekly change, one more than the previous week. The largest positive contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and by the expected inflation rate over the next 10 years (BIR_10yr).
Over the past year, 12 of the 18 indicators made a positive contribution to the index, which is unchanged from the previous week. For the third consecutive week, the two largest positive contributions over the past year were made by the BIR_10yr and the Mlynch_BMVI_1mo. Six indicators made a negative contribution over the past year, which was also unchanged from the previous week. For the second consecutive week, the two largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and 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.
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.
FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.