The St. Louis Fed’s Financial Stress Index continued its slow movement higher in the week ended September 27, rising to -1.271 after -1.284 in the prior week. It would take quite a stretch to say that markets are stressed in the historical context, but gyrations in stock market, sudden and unusually strong changes in bond yields, and worries about a possible recession are causing some discomfort to creep in.
After two weeks of improvement the basis point spread between the 3-month/10-year yields widened again although it is less severe that it has been among the readings of the past nine weeks. The 2-year/10-year spread — to which Fed policymakers pay more attention — remained positive for a fourth straight week, although the spread is quite narrow.
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