When you buy a bond, you are making a loan. You have agreed to hand over a bunch of money today and in return you get scheduled payments from the lendee. The quarterly or biannual or yearly payments are set in a specific currency.
If you recall the stories told about Germany after WW1, they jacked up their inflation because their repayment (pmts were to France, I believe) amounts were set in Deutsche Marks. Because the German gov't could print marks, they could raise inflation arbitrarily. Inflating the volume of deutsche marks in circulation makes each individual deutsche mark less valuable.
So in the late 20s or early 30s, the German got had cut themselves a sweet deal handing worthless deutsche marks over to the French and the german people would buy loaves of bread with wheelbarrows of Deutsche marks, according to the tales.
Inflation is not only the result of printing extra money. If workers become more valuable, their salaries rise and they have extra money to spend, the merchants they trade with can raise prices as well, etc.
So from a naive, freshman macroeconomics view (ie mine), increased trade, increased demand drives inflation in the currency. By that same token, decreased economic activity, laid off workers etc drives deflation. In that scenario, money is worth more and more because many people don't have it. That's when someone on the street in the Great Depression trades a pound of apples for a nickel, when currency is scarce and valuable.
So betting on deflation can be tantamount to betting the U.S. economy at large will tighten up and times will be rough. It is my understanding of the Telegraph headline that many traders bet on an economic downturn that never got as bad as they had hoped for.