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After Significant Increase, Financial Market Stress Falls Moderately

12/31/2015

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

Financial market stress fell modestly in the latest reporting week. After rising to its highest level in nearly four years in the previous week, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.596 for the week ending Dec. 25, down 0.035 from the previous week. In 2015, the index averaged -1.008, up markedly from the 2014 average of -1.417. (Zero represents normal financial conditions.)

STLFSI Weekly Change graph

Over the past week, nine of the 18 indicators contributed positively to the weekly change in the index, eight fewer than the previous week. The two largest positive contributions were made by the yield spread between the 3-month Treasury bill and the 3-month Eurodollar (TED) and by the yield spread between 3-month LIBOR and the 3-month overnight index swap spread (LIBOROIS_3mo). Six of the 18 indicators contributed negatively to the weekly change in the index, six more than the previous week. The two largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo).

STLFSI Yearly Change Graph

Over the past year, 14 of the 18 indicators made a positive contribution to the index, one fewer 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 by the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year Treasury security (HighYield_CRS). Two indicators made a negative contribution over the past year, the larger being the Mlynch_BMVI_1mo.

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