WarrenB1

an investor might think this particular corporate bond is undervalued and this bond's yield could converge to its benchmark tsy yield as firms's financial condition improves. so he buys corporate bond and sells tsy bonds hoping to make money as spd (corporate bond yield - tsy yeld) narrows.

Next day, big catastrophic event took place (ie. lehman files bankruptcy) and people moving their money from risky asset (ie. selling corporate bond) to riskless asset (ie. buying tsy). This investor just suffered large loss on his earlier trade.

hope this helps