Financial Market Stress Rises for First Time in Seven Weeks


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

Financial market stress edged up in the latest reporting week after falling in the previous six weeks. For the week ending April 1, the St. Louis Fed Financial Stress Index (STLFSI) measured -0.808, up slightly from the previous week’s revised value of -0.844.

STLFSI Weekly Change graph

Over the past week, 10 of the 18 indicators contributed negatively to the change in the index, three fewer than the previous week. The two largest negative contributions were made by the yield on Baa-rated corporate bonds (BAA) and by the Chicago Board Options Exchange Market Volatility Index (VIX). Five of the 18 indicators contributed positively to the weekly change in the index, two more than the previous week. The two largest positive contributions were made by the yield spread between 3-month Treasury bills and 3-month Eurodollar rates (TED) and by the yield spread between 3-month commercial paper and 3-month Treasury bills (CPS_3mo).

STLFSI Yearly Change Graph

Over the past year, 14 of the 18 indicators made a positive contribution to the index, and four indicators made a negative contribution to the index. These totals were unchanged from the previous week. For the ninth 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 difference between that rate and the 10-year U.S. Treasury security (HighYield_CRS). For the seventh 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.

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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.

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