St. Louis Fed Financial Stress Index Falls to Lowest Level in Four Weeks


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

Financial market stress fell for a second consecutive week, bringing it to its lowest level in four weeks, according to the St. Louis Fed Financial Stress Index (STLFSI). For the week ending Aug. 19, the index measured -1.145, down modestly from the previous week’s revised value of -1.097. Zero represents normal financial stress.

STLFSI Weekly Change graph

Over the past week, 10 of the 18 indicators contributed negatively to the change in the index, the same number as in the previous week. As in the previous week, the largest negative contributions were made by the yield difference between the three-month commercial paper rate and the three-month Treasury bill (CPS_3mo) and the yield spread between the Merrill Lynch High-Yield Corporate Master II Index and the 10-year U.S. Treasury (HighYield_CRS). Five of the 18 indicators contributed positively to the weekly change in the index, also the same number as the previous week. The two largest positive contributions were from the Chicago Board Options Exchange Market Volatility Index (VIX) and expected inflation rate over the next 10 years (BIR_10yr).

STLFSI Yearly Change Graph

Over the past year, 10 of the 18 indicators made a positive contribution and eight indicators made a negative contribution to the index. The largest positive contributions over the past year were made by the difference between the three-month London Interbank Offering Rate and the three-month Overnight Index Swap spread (LiborOIS_3mo) and the difference between the three-month Treasury bill yield and the three-month Eurodollar rate (TED). The two largest negative contributions were made by the yield on Baa-rated corporate bonds (BAA) and 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.