As a result, convexity in the high yield market is better than it has been for virtually all of the post-GFC period. Instead of 5-10 points of upside price potential, high yield bonds now may ...

Additionally, the convexity opportunity in MBS could reverse to negative territory in the case of a hard landing or severe recession, resulting in a fast and sharp rate rally by more than 200 ...

Investors also hedge against negative MBS convexity by buying so-called "receivers" in the swaptions market, in which the buyer pays a premium for the right to receive a fixed rate on a swap.

Summary In corporate credit, we evaluate convexity as the upside price potential compared to the downside price potential. Newly issued high yield bonds typically have limited upside price ...