St. Louis Fed Financial Stress Index Declines Slightly

10/27/2016

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

Financial market stress fell modestly in the latest reporting week after rising slightly in the previous week. For the week ending Oct. 21, the St. Louis Fed Financial Stress Index (STLFSI) measured -1.189, down from the previous week’s revised value of -1.137 and the fourth decline in the past five weeks.

STLFSI Weekly Change graph

Over the past week, 12 of the 18 indicators contributed negatively to the weekly change in the index, six more than in the previous week. The largest negative contributions were made by the Merrill Lynch Bond Market Volatility Index (Mlynch_BMVI_1mo) and the Chicago Board Options Exchange Market Volatility Index (VIX). Four of the 18 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 J.P. Morgan Emerging Markets Bond Index Plus (EMBI) and the yield difference between BAA-rated corporate bonds and the 10-year U.S. Treasury (Corp_CRS).

STLFSI Yearly Change Graph

Over the past year, 11 of the 18 indicators made a negative contribution to the index, the same number as in the previous four weeks. Like in the last two weeks, the two largest negative contributions over the past year were made by the yield on BAA-rated corporate bonds (BAA) and the Merrill Lynch High-Yield Corporate Master II Index (Mlynch_HighYld_MasterII). Seven indicators made a positive contribution over the past year, also the same as in the previous four weeks. For the eighth consecutive week, the two largest positive contributions over the past year were made by the yield difference between the three-month London Interbank Offering Rate and the three-month Overnight Index Swap rate (LiborOIS_3mo) and the difference between the three-month Treasury bill yield and the three-month Eurodollar rate (TED).

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.

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mediainquiries@stls.frb.org

Adriene Dempsey

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Suzanne Jenkins

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Laura Girresch

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Maria Hasenstab

314-444-8321

Laura Taylor

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