Financial Market Stress Rises for Second Consecutive Week

11/19/2015

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

Financial market stress rose modestly in the latest reporting week. For the week ending Nov. 13, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.846, up 0.038 basis points from the prior week’s revised value of -0.884 and the second consecutive weekly increase. 

STLFSI Weekly Change graph

Over the past week, 12 of the 18 indicators contributed positively to the weekly change in the index, three more than the previous week. The largest positive contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and the yield differential between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year Treasury security (HighYield_CRS). Four indicators contributed negatively to the weekly change in the index, three fewer than last week. The three largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo), the yield differential between 3-month commercial paper and the 3-month Treasury bill (CPS_3mo), and the yield differential between the 3-month Treasury bill and the 3-month Eurodollar (TED).

STLFSI Yearly Change Graph

Over the past year, 13 of the 18 indicators made a positive contribution to the index, one more than the previous week. The two largest positive contributions over the past year were made by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) and the expected inflation rate over the next 10 years (BIR_10yr). Five indicators made a negative contribution over the past year, one fewer than the previous week. The largest negative contribution over the past year was made by the difference between the 3-month London Interbank Offering Rate and the Overnight Index Swap rate (LiborOIS_3mo).

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

The St. Louis Fed will release the index a day early next week because of the Thanksgiving holiday. A press release will go out Wednesday, Nov. 25, after the index is updated in the Federal Reserve Economic Data (FRED) database at 9 a.m. CT that day.  The index will resume its normal schedule the following week. 


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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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Suzanne Jenkins

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Laura Girresch

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Maria Hasenstab

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Laura Taylor

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