NFCI: What the 105 Sub-Variables Actually Measure (Risk, Credit, Leverage)

The aggregate NFCI masks its internal machinery. Beneath the composite score, the Chicago Fed publishes three sub-indices in parallel (risk, credit, leverage) each built from a subset of the 105 indicators on the official list (47 weekly, 29 monthly, 29 quarterly).

Reading the sub-index decomposition changes the analytical grammar. Inter-market divergence is often more informative than the aggregate value itself.

Why decompose the aggregate: analytical stakes

The weekly NFCI, introduced by the Chicago Fed in 2011 and computed back to January 1971, is a composite measure. Read at its aggregate value alone, it discards the internal stress structure, which is often more informative than the composite score. When the aggregate index sits at zero, two radically different configurations are possible: the three sub-indices are simultaneously at zero (generalized equilibrium), or some sub-indices are positive while others are negative and offset on average (unstable equilibrium masking fragility). Without decomposition, these two regimes are not distinguishable.

The Chicago Fed publishes every Wednesday at 8:30 AM Eastern time (Thursday when a federal holiday falls earlier in the week), alongside the aggregate, the three sub-indices NFCIRISK, NFCICREDIT, and NFCILEVERAGE, covering the week through the previous Friday. Each is built from a subset of the NFCI’s 105 indicators, then normalized (zero mean, unit standard deviation since 1971). The official indicator list of April 2026 assigns 36 indicators to risk, 33 to credit and 36 to leverage; 47 are weekly, 29 monthly and 29 quarterly. The technical construction detail is treated in the article on how the aggregate is computed. For ongoing weekly access to all three series, the FRED NFCI dataset for the raw series provides direct download.

This decomposition is a financial conditions transmission structured by channel: risk, credit, leverage are three distinct propagation channels between the financial system and the real economy. Each channel mobilizes different actors, markets, and timescales. The purpose of this article is to map the real content of each of the three sub-indices and to provide a coherence-or-divergence reading grid, which analytically extends the reading of the aggregate index as meta-measure without replacing it.

The risk sub-index: money markets, volatility, short-term funding

The risk sub-index (NFCIRISK) measures tensions on money markets and financial volatility indicators. Its main components fall into four families: short-term funding spreads, gaps between market rates and risk-free rates, implied volatility indices, and certain market liquidity measures.

Short-term funding spreads include the commercial paper spread (gap between financial CP three-month rate and Treasury 3-month rate), repo spreads (Fed Funds versus overnight Treasury repo, GCF Treasury versus MBS repo), and the 3-month OIS-Treasury spread. These measures capture the ease or difficulty for financial institutions to refinance on wholesale markets. In normal times, the commercial paper spread oscillates between 10 and 30 basis points; in stress periods (August-September 2007, March 2020), it can jump to 200-400 basis points within weeks.

Gaps between market rates and risk-free rates include the 3-month LIBOR-Treasury spread (the TED spread), which the Chicago Fed splices onto CME Term SOFR after LIBOR ended in June 2023, and the 2-year and 10-year swap spreads (gap between fixed leg of an interest rate swap and Treasury yield at matching maturity). These spreads capture the counterparty risk premium on interbank and derivatives markets. The TED spread went from about 70 basis points in early June 2007 to 458 basis points on October 10, 2008, its record, a level that on its own summarizes the market-credit signature of the GFC.

Implied volatility indices include the VIX (30-day implied volatility on S&P 500, CBOE) and the MOVE (one-month bond market implied volatility, measured since 1988 from options on Treasuries and now published by ICE BofA). Our VIX history series compiles the full historical series. These two measures give the ex-ante risk premium embedded in options. The average VIX close since 1990 is 19.4 (Cboe); closing peaks exceed 80 (80.86 on November 20, 2008, 82.69 on March 16, 2020). On the April 2026 list, the VIX weighs 3.4 out of 100, the MOVE 2.6 and swaption volatility 2.9.

Risk is the heaviest block: its 36 indicators carry 60.6% of the NFCI’s absolute weights. The sub-index peaked at +1.63 on November 13, 1987. In 2011, during the euro area crisis, it stayed negative (−0.07 at its high, on September 23) while leverage rose to +1.09.

The credit sub-index: corporate spreads, bank lending, non-bank financing

The credit sub-index (NFCICREDIT) measures the ease or difficulty of obtaining debt financing in the U.S. economy, through the three main channels: commercial bank credit, market-based corporate credit, non-bank financing. With 33 indicators it is the smallest of the three sub-indices; together they carry 30.2% of the absolute weights, which the Chicago Fed re-estimates every week with little change.

Commercial bank lending conditions are measured by the Senior Loan Officer Opinion Survey (SLOOS), a quarterly Fed survey addressed to roughly 80 domestic banks and 24 foreign bank branches. SLOOS asks credit officers whether they have tightened or loosened their lending standards over the quarter, and the net fraction of banks having tightened enters the sub-index. A positive net fraction (more banks tightening than loosening) pulls the sub-index up. The October 2008 survey recorded net tightening of 83.6% on commercial and industrial loans to large and middle-market firms, the series record. In April 2023, after the regional bank failures, the net fraction reached 46.0% (50.8% in July) without lifting the aggregate above −0.15. The seven SLOOS questions on the list each weigh less than 0.3 out of 100.

Market-based corporate spreads enter through the gap between ICE BofA’s high-yield yield and Moody’s Baa yield, the Baa-10-year Treasury spread, and the Markit investment-grade and high-yield CDS indices; ICE BofA’s aggregate OAS series are not on the list. For scale, ICE BofA’s OAS series peaked in November 2008, with the high-yield OAS exceeding 1,800 basis points; in May 2026 they were at historically tight levels.

Non-bank financing enters through the one-month A2/P2-AA nonfinancial commercial paper spread (4.0 out of 100, the sub-index’s second-largest weight after the auto ABS spread), jumbo and conforming mortgage spreads, and the monthly Credit Manager’s Index of the National Association of Credit Management, which tracks trade credit between firms. ABCP (asset-backed commercial paper) sits in the risk sub-index, through its spread over financial commercial paper: outstanding ABCP fell from $1,226bn on August 8, 2007 to $348bn at end-2010, and stood at $504bn on September 30, 2026 (Federal Reserve).

Credit peaked at +3.49 on May 2, 1980, its record, and at +2.80 on December 5, 2008. Since 2024 it has stayed close to its historical mean (−0.02 on average in 2024, −0.03 in 2025 and 2026): risk, far below its own mean, is what keeps the NFCI accommodative.

The leverage sub-index: margin, hedge funds, dealers, investment banks

The leverage sub-index (NFCILEVERAGE) measures leverage and balance sheet conditions at financial intermediaries and leveraged investors. It is the hardest sub-index to interpret without knowing the balance sheet mechanics of market intermediaries, but it is also the one that captures the most systemically dangerous stress episodes (LTCM 1998, GFC 2008, March 2020). Directly related: the mechanics of liquidity and QT.

The heaviest weights go to financial stocks relative to the S&P 500 (3.6 out of 100: financials underperforming tightens conditions) and to open interest in equity and rate futures. Next come issuance (CMBS, ABS, corporate bonds and equity, municipal debt), commercial bank balance-sheet ratios and intermediary assets relative to GDP. Margin account debit balances, a NYSE series spliced onto FINRA’s, weigh only 0.13: according to FINRA they reached $1,502bn in June 2026, a series record, against $936bn in October 2021.

Hedge fund flows do not enter the sub-index: the list contains none, and fund leverage shows up only indirectly, through futures open interest. Divergent in flow, these vehicles run on the same financing plumbing, and that plumbing is what sets the transmission role of leveraged funds in market stress.

Primary dealer inventories published by the New York Fed are not on the list either; only those dealers’ repo volume enters, in the risk sub-index. March 2020 was still a leverage episode: the sub-index reached +0.96 on April 3, against +0.61 for credit and +0.15 for risk.

Balance-sheet ratios come from bank statistics and the quarterly financial accounts: assets of broker-dealers, finance companies, ABS issuers or REITs relative to GDP, and commercial bank loans and securities relative to total assets. These monthly and quarterly series are not interpolated: the model’s Kalman filter handles the weeks without observations (Brave and Butters, Economic Perspectives, 2011).

The 36 leverage indicators carry only 9.2% of the absolute weights, yet the sub-index is the most stretched of the three in balance-sheet crises: a record +3.94 on February 13, 2009, +1.09 in September 2011, +1.12 in June 2023. The NFCI FAQ notes that leverage tends to lead financial stress, while risk is coincident and credit lagging (Brave and Butters, 2012).

Reading coherence or divergence among the three sub-indices

The main analytical value of decomposition lies in coherence-or-divergence reading. When the three sub-indices move in the same direction with comparable magnitudes, the aggregate summarizes without distorting the signal: on November 28, 2008, risk, credit and leverage all stood between +2.8 and +3.3. March 2020 is already less clear-cut (risk +0.15, leverage +0.96). When one sub-index diverges durably, the aggregate masks structural information: in the data through June 5, 2026 shown in the chart (June 10 vintage), leverage stood at +0.45, credit at −0.04 and risk at −0.60. Weekly revisions have since brought that June leverage reading down to +0.26; on September 25, 2026, leverage is at +0.08, credit at −0.06 and risk at −0.63.

This reading grid justifies systematically looking at the three sub-indices alongside the aggregate, and computing their instantaneous dispersion. This standard deviation has no official threshold. Since 1971 its median is 0.32; it sits below 0.15 in 6.8% of weeks and above 0.30 in 56%. It fell to 0.18 in November 2008, when the three blocks moved as one, and stood at 0.31 on September 25, 2026: today’s gap is ordinary in size, and its composition (low risk, positive leverage) is what makes it readable.

This reading grid complements without replacing the comparison with VIX and HY OAS, which examines the relationship between aggregate NFCI and other external indicators of U.S. financial stress.

Last updated — 7 October 2026