BofA Merrill Lynch analyst, Benjamin Bowler, believes rate volatility needs to increase if the VIX is to hold its high levels. The recent concern over rates is a common narrative but the reality is that rates volatility remains subdued. The analyst believes that "the largest shocks look more driven by positioning in equities and short equity vol, which generated the largest rise in VIX futures in history".

The analyst stated "Quant funds (CTAs and Risk Parity funds running vol control) have likely contributed to the equity selling in one of the largest deleverings in our models’ history, but their impact should dissipate quickly from here. Absent contagion back into rates, we expect this equity centric shock to fade and would position for equity vol mean reversion via VIX put structures; however, it presents another wake-up call that equities have been significantly underpricing risk".