Yield Spread and the Equity Market

Why would yield spread widen when equity market is weak?

my analogy is when equity is doing good investors will move money from bonds to equity this will lead to increase in the bond yield and hence the spread. So, the yield spread will increase during strong equity market. What am I missing here?

Yield spread = Credit risk + liquidity risk

Thanks.

You’re assuming that yields increase on risky bonds but not on risk-free bonds. Or, at least, that they increase more on risky bonds than on risk-free bonds.

Why do you assume that?