Financial Market Stress Declines for Fourth Consecutive Week

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

Financial stress continued to decline last week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Oct. 30, the index measured -0.879, down from the prior week’s revised value of -0.847. The latest reading is the lowest in 11 weeks and marks the fourth consecutive week of declines. 

Over the past week, 11 of the 18 indicators contributed negatively to the weekly change in the index, two more than the previous week. The two largest negative contributions were made by the 3-month Treasury-Eurodollar spread (TED) and by the spread between 3-month commercial paper and 3-month Treasury bill (CPS_3mo).  As both of these spreads are measures of the credit premium over the 3-month Treasury bill, their negative contributions over the past week are likely due to recent increases in the 3-month Treasury bill rate. Five indicators contributed positively to the weekly change in the index, two fewer than the previous week. The largest positive contribution was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo). 

Over the past year, 12 of the 18 indicators made a positive contribution to the index, one more than the previous week.  Six indicators made a negative contribution, one fewer than the previous week. The two largest positive contributions over the past year were made by the 10-year breakeven inflation rate (BIR_10yr) and by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII). The largest negative contribution over the past year was made by the Mlynch_BMVI_1mo.

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