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.)
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).
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.
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.
FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.