jmh530

fixed income security prices move in the opposite direction of interest rates. so the market price changes are determined by the direction of change of interest rates. If rates move up prices fall , while if they move down prices rise. For treasuries ,prices rise at an ever increasing rate as rates fall and prices fall at an ever decreasing rate when rates fall. There is no optionality( only +ve convexity)

A mortgage on the other hand has negative convexity when rates fall and positive convexity when rates rise . So the convexity is determined by the direction of rates i.e. it is a market directional security ( which just means it has optionality)