Interest rate volatility & falling rates part deux

[Sartorial]

Now, why does the value of a putable bond increase while the value of a callable bond decreases when interest rate volatility increases?

If rates are going to bounce around and I’m an issuer, not a holder of a callable bond, I would view that call provision as valuable. I would call the bonds when rates move lower during the said “volatility”.

My Kaplan Quicksheet says, “When interest rate volatility increases: Value of call option increases, Value of Put Option increases, Value of callable bond decreases, Value of Putable bond increases.”

[Sartorial]

Upon further review and thinking, I believe I hear a gong.

From an investor’s perspective, when interest rate volatility increases and the issuer’s desire to call the bond issue rises, prospective investor demand then decreases significantly. Hence, the value of the callable bond falls.

In my second paragraph from above, I conflated the callable bond and its call option. I see now.