When is Boring Good?

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.

You're tired
Boring
You're sore
Boring
You worked all day
Boring
- Pink 

Watching the quotes flit by on my Bloomberg last Wednesday regarding the FOMC meeting, I must admit to being quite bored. This was a very unusual and unsettling feeling as I typically enjoy market events — whether good or bad. Since high school, I've always known I wanted to work in the investments field, especially during volatile times.

But these are not volatile times.

Reading the newspapers, there seems to be all kinds of reasons for people to place wild, outlandish bets - the stuff that creates volatility*.

Sampling a snapshot of headlines on a major paper's Web site recently, I saw headlines that imply major events such as:

• Plan for the U.S. to pull out of Afghanistan
• Republicans questioning the President's authority in Libya
• Regulator worries over derivatives that may be linked to Greece without participants' knowledge
• Potential flooding in North Dakota (a continuation of a trend?)
• Al Qaeda members escaping a Yemen prison
• Morgan Keegan, a major regional brokerage, put up for sale after agreeing to pay a $200 million fine in a mortgage securities case
• Fed lowering outlook for U.S. growth
• Greeks fear their government is "selling" their nation to pay off debt
• Spending cuts to hurt recovery (which the Fed believes will improve)

Uncertainty should create diametrically opposing views. In markets with a single clearing price, this means there should always be a trade and the swings of sentiment from one view to the other should lead to volatile price movements.

But such is not the case today.

In the bond market, we've seen the 2-year Treasury note fall from 1.13 percent to today's paltry 0.37 percent over the last 18 months. Though this is quite a swing in yields, looking forward, it's difficult to imagine many disparate views. As rates get lower, markets get quieter because everyone knows they eventually will have to go up.

This forces market participants to just one side of the trade and today that trade is to hold cash. Some might blame today's inactivity on the "dog days of summer," but I prefer action more akin to Al Pacino's Dog Day Afternoon.

So what are investors to do?

After being "holed up" waiting for better entry points into the market, bond investors are feeling frustrated and concerned. The source of the frustration is somewhat obvious: low yields mean low returns and low returns mean unhappy constituents. It doesn't really matter whether you are beating your benchmarks or not. Psychologically, achieving returns well south of 1 percent is very difficult to get used to.

On the other hand, bond investors are not simply bond investors. They are stewards of cash with the responsibility to ensure that cash is available for its planned use.

In today's markets with yield differentials sometimes measuring just 10 or less basis points, it can be better to remain on the sidelines. If the market is only offering boring, you have to buy boring.

But for those investors whose cash balances allow them to invest out to 1 year or more, the positively shaped yield curve does offer an opportunity to add some yield.

And with the tone and content of last week's Fed meeting implying the Fed will remain on hold into the future, you are likely to be happy to add that yield for quite some time.