A modest decline in financial market stress was reported for the week ending Dec. 26, according to the St. Louis Fed Financial Stress Index (STLFSI), which measured negative 0.989, down from the previous week's revised value of negative 0.840.
The value in the week ended Dec. 19 was the highest reading of the STLFSI since the week ending July 12, 2013.
In the past week, nine of the 18 indicators contributed negatively to the weekly change in the STLFSI. "The two largest negative contributions were made by Chicago Board Options Exchange Market Volatility Index (VIX) and the yield spread between the Merrill Lynch High-Yield Corporate Master II index and the 10-year Treasury security (HighYield_CRS)," the Fed said. "Over the past week, nine indicators made positive contributions to the STLFSI. The largest positive contribution was made by the TED spread, the difference in the yield between 3-month Treasury bills and 3-month Eurodollars (TED)."
For the past year, 11 indicators were positive and 7 were negative, according to the Fed.
The 18 weekly data series that comprise STLFSI include seven interest rate series, six yield spreads and five other indicators.
"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," the Fed said.
