St. Louis Fed Financial Stress Index Declines Slightly

8/18/2016

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 Aug. 12, the index measured -1.094, a decrease of 0.022 from the previous week’s revised value of -1.072. Zero represents normal financial stress.

STLFSI Weekly Change graph

Over the past week, 10 of the 18 indicators contributed negatively to the weekly change in the index, four more than in the previous week. The two largest negative contributions were made by the yield difference between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year Treasury (HighYield_CRS); and by the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII) itself. Five indicators contributed positively to the weekly change in the index, seven fewer than in the previous week. The two largest positive contributions were made by the yield difference between the three-month commercial paper rate and the three-month Treasury bill (CPS_3mo); and by the yield difference between the three-month London Interbank Offering Rate and the Overnight Index Swap spread (LiborOIS_3mo).

STLFSI Yearly Change Graph

Over the past year, 10 of the 18 indicators made a positive contribution to the index, one more than in the previous week. Eight indicators made a negative contribution, one fewer than in the previous week. The largest positive contribution over the past year was made by the LiborOIS_3mo. The largest negative contribution was made by the yield on Baa-rated corporate bonds (BAA).

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

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Laura Girresch
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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.