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On the radar: St. Louis Fed’s Financial Stress Index retreats in August 23 week

The St. Louis Fed’s Financial Stress Index retreated slightly in the August 23 week, down to -1.243 from -1.179 in the prior week when it was the highest since -1.177 in the February 22 week.

It would be an exaggeration to say that the index reflects stressed conditions in financial markets. However, even with the prospect of the Fed providing further accommodation, heightened concerns about a recession are keeping readings higher than they were earlier in the summer.

The 2-year/10-year yield spread for Treasurys remains close to nonexistent for a second week in a row. The 3-month/10-year yield spread reached its widest in the current episode, an uncomfortable situation that may not be getting immediately better. The inversion of the 3-month/10-year yield curve has been in place since the end of May.

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