For there to be such a dark side, there would have to be some sort of asymmetry in the unwinding of the effects of monetary policy on these risk premiums, whereby the eventual reversal either happens more abruptly, or causes larger economic effects, than the initial compression. Let’s take an example.
Suppose that initially, the credit risk premium on high-yield bonds is 400 basis points, and that, because the unemployment rate is well above target, the Federal Reserve wants to add monetary accommodation.