The St. Louis Fed’s Financial Stress Index was up slightly in the week ended November 8 at -1.301 after -1.324 in the prior week. The reading matched the -1.301 in the September 6 week. Overall, stress in financial markets remains quite low even with Fed officials lining up behind a pause in further cuts in short-term interest rates. Although risks remain, some signals for a recession have retreated further and equities markets rebounded.
The spread between 3-month Treasury bills and 10-year Treasury notes reached 34 basis points, the widest since 34 basis points in week average of February 1. The spread between the 2-year and 10-year notes — more closely watched by Fed policymakers — was 22 basis points, its widest since 23 basis points in the week average of July 26. The relationship between shorter and longer term yields is starting to look less stressed.
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