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Financial Market Stress Falls for Sixth Consecutive Week

3/31/2016

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

Financial market stress continues to fall according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending March 25, the STLFSI measured -0.842, down sharply from the previous week’s revised value of -0.773 and its sixth consecutive weekly decline. Because of its marked rise earlier this year, the STLFSI has averaged -0.539 thus far in 2016, up sharply from its average over the comparable period in 2015 (-1.162).

STLFSI Weekly Change graph

Over the past week, 13 of the 18 indicators contributed negatively to the change in the STLFSI, one more than the previous week. The two largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the Chicago Board Options Exchange Market Volatility Index (VIX). Three of the 18 indicators contributed positively to the weekly change in the STLFSI, one fewer than the previous week. The largest positive contributions were made by yield spread between three-month Treasury bills and three-month eurodollar rates (TED) and the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury security (HighYield_CRS).

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. For the eighth 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 the HighYield_CRS. Four indicators made a negative contribution to the index over the past year, one more than the previous week. For the sixth consecutive week, the largest negative contribution 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.