Financial Market Stress Rises for Third Week

8/20/2015

Please note: Data values previously published are subject to revision. For more information, refer to the vintage series in ALFRED®.

For the week ending Aug. 14, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.968, up modestly from the previous week’s revised value of -0.994.  The increase is the third in a row.  Year-to-date, the index has averaged -1.082, a marked increased from its average of -1.435 over the same period last year.  (Normal financial market conditions are represented by zero.)

STLFSI Weekly Change graph

Over the past week, eight 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 3-month commercial paper and 3-month Treasury bills (CPS_3mo) and by the yield spread between 3-month Treasury bills and 3-month Eurodollars (TED). Seven indicators contributed positively to the weekly change, also one fewer than the previous week. The largest positive contributions were made by the expected inflation rate over the next 10 years (BIR_10yr) and by the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year Treasury security (HighYield_CRS).

STLFSI Yearly Change Graph

Over the past year, 12 of the 18 indicators made a positive contribution to the index and six indicators made a negative contribution—numbers that were unchanged from the previous week. For the fourth consecutive 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 over the past year were made by the S&P 500 Financials Index (SP500_FI) and by the yield on 30-year U.S. Treasury securities (Treas30y).

For an explanation of the 18 component variables in the STLFSI, refer to the STLFSI Key.

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Laura Girresch
laura.e.girresch@stls.frb.org
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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.