The precipitous decline in 30-year Treasury yields this year sends a dour message about the strength of the economy, argues Leader Capital's John Lekas, whose funds have vastly outperformed those of his competitors over the past few years.
"You need to watch the 30-year over the next 90 days," Lekas said. "It's a bellwether for the market, and numbers suggest economic trouble."
After starting the year close to 4 percent, the 30-year Treasury bond year has dropped to 3.3 percent. Meanwhile, the 10-year note yield has fallen to 2.5 percent, from 3 percent. Looking forward, Lekas suggests that the two yields could converge.
"Our view is that the Treasury curve flattens here, meaning that the 10-year goes to 2.75 and the 30-year goes to 2.75," he said on Tuesday's "Futures Now."
This flattening would follow from dampening expectations of inflation and economic growth. After all, if investors believed that growth would come back in a big way, they would require more compensation for the attendant inflation risks that would be inherent in long-term fixed-income securities—as well as for the opportunity cost of forgoing equity investments.
But Lekas doesn't see much growth, or inflation, on the horizon.
Along with stocks, "our credit debts are at all-time highs—$3.14 trillion. We're maxed out at 2007 levels on margin debt. And at the same time, you've got household median income that's gone from $56,000 to $51,000. So I think that the consumer is kind of out of play here, and I think ultimately, we've had our recovery."