Binding Breaks First: Diagnosing Contextual Hallucinations under KV-Cache Compression

Key–value (KV) cache compression reduces the memory cost of long-context inference, but can also degrade context-dependent reasoning and increase hallucinations that contradict the provided context. Existing evaluations mainly measure how much performance drops, leaving unclear what information is actually lost or corrupted by compression. We propose BindProbe, a diagnostic framework that separates two possible failure modes: item-access failure, where an entity or attribute value can no longer be recovered, and binding failure, where both remain accessible but the model can no longer determine which value belongs to which entity. BindProbe places controlled entity–value associations at different positions in long contexts and evaluates them with separate entity, value, and binding probes. Across several evaluated compression settings, we observe regimes in which relational binding degrades substantially while access to the individual items remains comparatively stable. This produces item-preserving misbinding: the model retains the relevant entities and values but associates them incorrectly. The effect is strongly position dependent, with associations in the middle of the context becoming vulnerable at lower compression rates. Mechanistic analyses further show that KV states important for recovering these associations are systematically assigned lower importance by compression criteria, making them more likely to be removed or distorted as the cache budget shrinks. Our results show that compression-induced contextual hallucinations can arise not only because information is forgotten, but also because the relationships among still-accessible information are disrupted.