Financial Market Stress Declines Over Previous Week


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

Financial market stress eased in the latest reporting week after rising sharply over the previous two weeks. For the week ending Sept. 4, the St. Louis Fed Financial Stress Index measured -0.591, down modestly from the previous week’s revised value of -0.517 and the first decline since the week ending July 24.

STLFSI Weekly Change graph

Over the past week, 10 indicators contributed positively to the weekly change, two fewer than the previous week. The largest positive contribution was made by the three-month Treasury-Eurodollar yield spread (TED), followed by the yield spread between three-month commercial paper and the three-month Treasury bill (CPS_3mo). Eight of the 18 indicators contributed negatively to the weekly change in the STLFSI, four more than the previous week. The largest negative weekly contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and the yield difference between the Merrill Lynch Corporate Master II Index and the 10-year Treasury bond (HighYield_CRS).

STLFSI Yearly Change Graph

Over the past year, 14 of the 18 indicators made a positive contribution to the index, and four indicators made a negative contribution. These contributions were unchanged from the previous week. The largest positive contributions over the past year were made by the VIX, the expected inflation rate over the next 10 years (BIR_10yr) and the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). For the third straight week, the largest negative contribution was made by the yield on 30-year Treasury securities (Treas30y).

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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