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."
In fact, although the market was spooked on Tuesday by Philadelphia Federal Reserve President Charles Plosser's comments that an improving economy might for the Fed to raise rates "sooner rather than later," Lekas has a different prediction.
"I think what's going to make the Fed raise rates here is an asset bubble, not economic growth," Lekas said.
In the fixed income world, Lekas's recent outperformance lends weight to his comments. He manages two Morningstar five-rated fixed-income funds, the Leader Short-Term Bond Fund and the Leader Total Return Fund. The smaller Total Return Fund returned 14.5 percent in 2012 and 8.9 percent in 2013, according to Morningstar, and is up 4 percent this year.
His secret is simple: shunning government debt in favor of corporate investment-grade bonds. And he's sticking with that strategy.
"The large-cap corporates where we play, they've taken their EBITDA from 4 times down to 1.5 times. So I think corporate America's restricted their balance sheets. Governments have not. They continue to increase leverage, carry bloated pension plans, etcetera. So I think the corporate space, investment-grade or better, will do very well in their environment I'm suggesting, which is a flat-yield curve and a pretty tough stock market," he said.
But even though he doesn't suggest buying Treasurys, he certainly prefers them to stocks.
"Even if you were wrong a little bit, I think you're safer there," Lekas said.
—By CNBC's Alex Rosenberg.