Negative convexity
A property of callable issues: when rates fall the price rises by less than it falls when rates rise.
How to read the number
The cause is the option the holder has in effect sold to the issuer: the lower rates go, the likelier the call, and the harder the price pushes against a ceiling.
When the metric lies
The property appears exactly where the bond was expected to win — in a cutting cycle. Ordinary duration at that point overstates the price gain to expect.
Also known as: convexity below zero