"Today’s large increase of market volatility will clearly contribute to further outflows from systematic strategies in the days ahead: the total amount of these outflows may add to ~$100bn... but there is a strong probability of policy makers stepping in to calm the market."
Congress prohibited the use of BPOs to underpin traditional mortgages as part of Dodd-Frank. But, fortunately for private-equity firms and their limited partners, that prohibition doesn't apply to investors buying tens of thousands of homes.
Today's story may not be stocks, but rather rates as the 10Y Treasury yield is now climbing above 2.6% for the first time since March, a key psychological level and Gundlach's "redline": "We are going to change the regime probably within the next 2-3 months."
The most important takeaway of the net short VIX ETP position is that short VIX ETPs now have more vega to buy on a given vol spike than ever before - leaving the potential for an outsized increase in volatility should the SPX sell off sharply...