That is, it features a gradual compression of risk spreads during a period of monetary ease, and then, when policy begins to tighten, it delivers a sharp and abrupt correction, driven by a particular form of market dynamics. Of course, this is just a theoretical prediction.
One thing that the paper does not do, but which would be very helpful in assessing the real-world relevance of the model, would be to see if this sort of asymmetry in bond returns is present in the data. In particular, if I am interpreting the model correctly, it implies a specific form of conditional volatility and skewness in bond returns.