svgleeson

Thanks, I think you are referring to swaption.
I have re-read the answer and also begin to understand the reason. When i/r falls, the fixed rate payer of the plain vanilla swap will be paying a higher rate than market rate of interest, hence its value will be lower than the value based on the market rate of interest (on a relative value basis). Tricky, I was wondering how value can decrease when i/r falls.