@Detroitgator , I watch interest rates every second of every day and pay attention to the yield curve as well. I have no particular opinion as to which is more viable, is it 2yr-10yr spread, 3mo.-10yr. spread, etc., whatever you think is best. All I know is that when the curve inverts, you hear the talking heads saying it is different this time. Well my experiences are that it is never different regardless of reason. I remember in 2006 on, that the curve was inverted as I was getting 1yr. CD's at roughly 6%, which I now was roughly equal to or above a 30yr mortgage, which means it was well above the 10yr. Treasury. Lending institutions were offering such rates b/c they needed all the money they could get b/c they were lending for everyone to buy 10 houses at a time.
Fast forward to now and just as the curve was almost completely flat, out of nowhere the 2-10yr spread went from about 12 basis points to about 65 bp's. Why? Most would think that during this turbulence, people would flock to Treasury's of all durations and to gold. But the opposite happened,. They sold gold and Treasurys b/c all they wanted to do was raise cash. Also the credit markets were basically shut and that is why the Fed has had to step in beyond the Repo market and once again become the buyer of last resort. If you watch Muni's, corporates or preferred stocks, they were selling AAA muni's, and corporates fast and some preferred stocks that have $25/par value traded a low as $15/share. They steadied on Thursday and Friday as the Fed has stepped in and many of those preferred stocks have gotten back to $20ish/ per share. Still trading at a significant discount and many with yield well above 6%. If you think things are safe, one might think about preferred stocks as an income play?
Where the yield curve goes from here is a good question. the 3 month T-Bill is zero basically and the 10 yr Treasury is about 85-90 basis points. If you are of the belief that the 10 yr. is going to zero then the curve will be flat to inverted again. But at this point I am personally am watching the credit markets for signs of stabilization. Personally I would like to see rates increase slowly and for the right reasons. Not b/c the markets are frozen or there are no bids, but b/c things are getting better. but I have no opinion as to when of if that is going to happen