How the gap between Baa corporate yields and 10-year Treasuries measures stress in the economy, and the thresholds Anacleto uses.
The credit spread is the extra yield that companies rated Baa by Moody's (the lowest investment-grade rating) pay over 10-year US Treasuries, in percentage points. When lenders worry about defaults they ask for more, and the spread widens.
The spread measures the health of the economy rather than the price of shares, and it has tended to widen before equity crashes, as in 2007–2008. It is one of the stress thermometers, together with the yield curve. Data: Moody's Baa yield from FRED, available monthly since 1919.
Spreads can also widen for technical reasons (liquidity, supply of new bonds), and in fast crises they move together with equities rather than ahead of them.