When the credit / risk spread is observed to be high, it
indicates recession and a high default rate risk.
Credit spread is also termed as an yield spread as it shows a
difference in yield or the rate of return between any two bond's or
any two Investments having similar maturity levels.
The yield curve represents the relationship between the yield
to maturity and the credit risk and the economy is expected to fall
into a recession if the difference in yield to maturity between two
bonds or investments leads to high default risk due to greater
financial stress.