The problem is simple, suppressed vol allowed vol targeting strats to lever up but when vol spikes, these strats are forced to rebalance (i.e. sell).

Here’s what Bloomberg had to say earlier today:

The capitalization of a global bond-market index slid by $450 billion Thursday, a fourth day of declines that pushed the week’s total above $1 trillion for only the second time in two decades, Bank of America Merrill Lynch data show. Global stocks gained $1.3 trillion in the same period. Yields on U.S. 30-year bonds, which are more sensitive than shorter maturities to the outlook for inflation, jumped the most this week since January 2009.

“We do view the election of Donald Trump as a game changer,” said Adam Donaldson, head of debt research at Sydney-based Commonwealth Bank of Australia. “The strong bias toward fiscal expansion and inflationary policy represents a stark change to the malaise of recent years. This opens the door for the Fed to hike in December, but also more quickly in 2017 and 2018 than previously expected.”

And here’s a look at the malaise:

Finally, from CLSA:

UST selloff may cause strategic risk-parity correlations to break down and “renewed turmoil” in credit markets, and create a “stress test” of BOJ’s commitment to keep JGB 10Y yield at 0%, CLSA strategist Christopher Wood writes in note.

Enough said.