An economist just made a surprising call about bonds

Trading Nation: Bond yields, Korea & the debt ceiling

The yield on the 10-year Treasury note rebounded Monday, climbing modestly from its two-month low hit last week, but some economists and strategists see further decline for the benchmark yield as investors flock to safer assets.

The 10-year note's yield, which was sitting near 2.21 percent on Monday, will likely move lower as pressure builds around risk assets like growth stocks, said Max Wolff, chief economist at Disruptive Technology Advisers, who believes it could be a leading indicator for equities.

In fact, Wolff sees more market weakness coming, and said the benchmark yield could fall even below 2 percent (a level it has not pierced since November 2016).

"This is the better fear gauge — especially as the VIX has been stuck on empty as political risk spirals out of control for a long while," Wolff wrote to CNBC in an email, referring to the 10-year Treasury yield better indicating broader market health than the CBOE Volatility Index (widely regarded as a so-called fear gauge), which has been hovering around historically low levels for much of this year.

Specifically, he said Friday on CNBC's "Power Lunch" that he is witnessing a "deceleration in excitement for some equity risk, and we would point out that for about seven weeks in a row now, we have seen net money leave U.S. equity funds and go into fixed income."

Investors appear to be looking for growth in "small tech companies" or "non-U.S. stories," Wolff said, and money is migrating into fixed income and safety, which in turn depresses yields. Bond prices and yields move inversely.

At this juncture, several factors point to downside for the 10-year Treasury yield, said Gina Sanchez, CEO of Chantico Global. The consumer price index, traditionally a measure of inflation, has underdelivered this year, which could stand to push bond yields further down. Additionally, growing geopolitical tensions between the U.S. and North Korea, which appear to have cooled Monday, could also depress bond yields. Such weakness in the bond market could begin taking stocks along with it, Sanchez said Friday on "Power Lunch."

However, she said, "If you see a reversal in the dollar, which continued soft inflation could get us, that could actually buoy the equity market."