What causes a Callable GSE to be called?
After the initial non-call period, the issuer has the right (but not the obligation) to call the debt for any reason prior to its stated maturity. As a practical matter, an issuer will generally decide to call the debt when it determines that market conditions are such that it can issue new debt at a lower rate than the existing debt. Investors considering an investment in Agencies should note that it is unlikely that they would be able to replace their called Agency with one that pays an equivalent interest rate under this scenario.
