The amount of 1-5% is associated with the 12hr TWAP price being 1-5% above target price of $1. Within this area the protocol will mint new arth to pay off the bonds once the 1hr TWAP is above $1.
While bonds (debt) is outstanding, 90% of the newly minted arth is delegated to pay off that debt. From the remaining 10%, 2% is paid to the ecosystem fund, and 8% goes to the LP pools. The Arth/Dai pool earning 70% of that 8%.
Basically, bonds are paid off first. At which point supply expansion occurs above $1.05 on the 12hr twap, and that gives a full 70% to the Arth/Dai pool, rather than 70% of 8% during the situation where bonds are still being paid off.
The protocol has to mint new Arth before it can be redeemed. That is, the 12hr twap needs to be above $1 to mint arth for bonds, and the 1hr twap needs to be above $1 to claim/redeem it.
If you took bonds out of the equation, the protocol is not supposed to expand when 12hr TWAP is between $1 and 1.05 - but it will expand in this area by a small % when bond debt is outstanding.
Hope that makes sense.