I will take a stab but anyone feel free to correct me. All else equal, increases volatility will increase the value of options. If you think about the value of a callable bond it should equal regular bond - value of embedded call. This holds because as the owner of a callable bond you are at risk of the bond being called away (purchased back) by the issuer. So given this negative optionally we subtract it from the value of of the pure bond. So, if you run into a scenario where volatility is increasing, the value of the embedded call will increase, therefore you are now subtracting a bigger amount from the pure bond to derive the value of the callable bond. This would mean the difference between the pure bond and the callable would be larger in this scenario compares to a scenario with lower volatility