Second-order sensitivity of bond price to yield: C = dfrac1Pdfracpartial^2 Ppartial y^2, with the second-order price change Δ P / P ≈ -D,Δ y + tfrac12C,(Δ y)^2. Always positive for option-free bonds (the price-yield curve is convex), and therefore always favourable to the long: gain on a rate fall exceeds loss on an equal rate rise. Callable bonds exhibit negative convexity near the call strike (price compression as yields fall, since the call becomes more likely to be exercised) — the structural reason MBS pass-throughs underperform in rate rallies.