Financial Market Stress Declined Before Recent Volatility

6/30/2016

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

Financial stress declined slightly in the latest reporting week, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending June 24, the STLFSI measured -0.911, a decrease of 0.040 from the previous week’s revised value of -0.871. Despite a few weeks with declines over the past month, the index remains above its month-ago (May 27) revised value of   -1.015. (It should be noted that this week’s stress reading likely does not reflect the market volatility starting June 24.)

STLFSI Weekly Change graph

Over the past week, nine of the 18 indicators contributed negatively to the weekly change in the index, three more than last week. The two largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and by the difference between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury security (HighYield_CRS). Seven indicators contributed positively to the weekly change in the index, three fewer than the previous week. The largest positive contribution was made by the Baa-rated corporate bond yield (BAA).

STLFSI Yearly Change Graph

Over the past year, 13 of the 18 indicators made positive contributions to the index, the same number as last week. Five indicators made negative contributions, which was also the same number as the previous week. The two largest positive contributions over the past year were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by HighYield_CRS. The largest negative contribution was made by BAA.

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