Do callable and putable bonds reduce duration for the same reason?

They often point to the same broad answer, lower effective duration than a comparable option-free bond, but the mechanics differ.

A callable bond gives the issuer the valuable right. When rates fall, the issuer can refinance, so the investor's upside is capped by the chance of being called away. A putable bond gives the investor the valuable right. When rates rise, the investor can sell the bond back, so the downside is cushioned.

So the shortcut is:

• Callable bond: upside is limited when rates fall.
• Putable bond: downside is protected when rates rise.
• Both features can reduce rate sensitivity compared with a straight bond.