St. Louis Fed Financial Stress Index Drops to Lowest Level Since Early December

3/24/2016

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

Financial market stress fell sharply in the latest reporting week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending March 18, the index measured -0.770, down sharply from the previous week’s revised value of -0.654. The latest decrease was the fifth in a row.  The index is at its lowest level since the week ending Dec. 4, 2015.

STLFSI Weekly Change graph

Over the past week, 12 of the 18 indicators contributed negatively to the change in the index, four 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). Four of the 18 indicators contributed positively to the weekly change in the index, four fewer than the previous week. The two largest positive contributions were made by the yield on 30-year Treasury securities (Treas30y) and by the yield on 10-year Treasury securities (Treas10y).

STLFSI Yearly Change Graph

Over the past year, 15 of the 18 indicators made a positive contribution to the index, one more than the previous week. For the seventh 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 spread between that same index and the 10-year U.S. Treasury security (HighYield_CRS). Three indicators made a negative contribution to the index over the past year, one fewer than the previous week. For the fifth consecutive week, the largest negative contribution was made by the Mlynch_BMVI_1mo.

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

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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.