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. For the week ending July 8, the St. Louis Fed Financial Stress Index (STLFSI) measured -1.041, down from the previous week’s revised value of -0.932. The index has declined in four of the past five weeks.
Over the past week, 12 of the 18 indicators contributed negatively to the change in the index, four more than in the previous week. The two largest negative contributions were made by the Chicago Board Options Exchange Market Volatility Index (VIX) and by the yield on Baa-rated corporate bonds (BAA). Five of the indicators contributed positively to the weekly change in the index, four fewer than in the previous week. The two largest positive contributions were made by yield difference between the three-month commercial paper rate and the three-month Treasury bill (CPS_3mo) and by the difference between the three-month Treasury bill yield and the three-month Eurodollar rate (TED).
Over the past year, 10 of the 18 indicators made a positive contribution to the index, two fewer than in the previous week. Eight indicators made a negative contribution, two more than in the previous week. . The largest positive contributions were made by the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury security (HighYield_CRS) and by the expected inflation rate over the next 10 years (BIR_10yr). The two largest negative contributions were made by the BAA and 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.
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.
FRED (Federal Reserve Economic Data) is the main economic database of the Federal Reserve Bank of St. Louis.