Securities lending is widely viewed as a low-risk strategy that generates extra income for mutual funds. We show that for corporate bond funds, this practice creates a hidden source of fragility. Lending funds hold significantly less cash buffer than non-lenders, outperform in normal times through lending income and collateral reinvestment, but underperform during large outflows. Using fund-level and position-level data, we document that lending funds recall and sell previously lent bonds when facing redemptions, creating price pressure and dragging down performance. Moreover, lending activity remains depressed for a year after outflow events, with affiliated lending agents facilitating faster recovery. This mechanism is unique to bond funds and absent in equity funds, revealing a fundamental tradeoff in corporate bond markets: the same practice that enhances returns in calm periods amplifies fragility during stress.