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Financial Market Stress Rises Again But Is Still Below Normal


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

Financial market stress continued to increase in the latest reporting week. For the week ending Jan. 15, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.416, up from the previous week’s revised value of -0.495.  The increase is the eighth in the past 11 weeks. The index is at its highest level since the week ending Dec. 30, 2011. Still, the level of stress is below normal (0=normal conditions).

STLFSI Weekly Change graph

Over the past week, nine of the 18 indicators contributed positively to the weekly change in the index, two fewer than the previous week. The largest positive contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by the expected rate of inflation over the next 10 years (BIR_10yr). Seven of the 18 indicators contributed negatively to the weekly change in the index, two more than in the previous week. The three largest negative contributions were made by:

  • the 3-month commercial paper yield less the 3-month Treasury bill rate (CPS_3mo);
  • the interest rate on the Merrill Lynch Asset-Backed Master BBB-rated bond (Mlynch_BBBAA); and
  • the 3-month Treasury-Eurodollar spread (TED).

STLFSI Yearly Change Graph

Over the past year, 15 of the 18 indicators made a positive contribution to the index and two indicators made a negative contribution. These numbers were unchanged for the third consecutive 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 on Baa-rated corporate bonds (BAA). For the fourth consecutive week, the largest negative contribution over the past year was made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo).

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