According to the sovereign debt market, Italian and Spanish bonds are now a better investment than Australian Commonwealth bonds. No one ever said markets have to make sense.

For all their problems of massive government debt burdens, recession, political uncertainty and high unemployment, the yield on Italian and Spanish 10-year bonds has fallen under 4 per cent while the yield on Australian long bonds has been steadily creeping up and been over 4 per cent since November.

Today's score on Bloomberg: Spain 3.71 per cent, Italy 3.82 per cent, Australia 4.1 per cent. And our 15-year bonds are yielding a heady 4.5 per cent.

The falling bond yields in the troubled European economies is a reflection of the growing confidence that the Euro crisis is waning. AMP chief economist Shane Oliver points out that Europe is the exception to the weak global start for sharemarkets – the falling bond yields encouraging investors to buy battered-down European shares.

The flip side is that the perceived need for the safe haven of Australian government debt is reducing at the same time as Treasurer Hockey is forecasting that he will have to borrow more, according to the MYEFO numbers.

While the MYEFO debt forecasts may well prove to be on the pessimistic side, there's also the suggestion that some sort of infrastructure bonds also will be issued. Bloomberg's Australian sovereign bond index  has shown a steadily rising yield for the past six months.

It's starting to look like Australia missed the sweet spot for borrowing to invest in its infrastructure – when the world was desperate to throw money at us for relatively little.

The state governments are at various stages of falling credit ratings as their fiscal futures tend not to add up to meeting the growing demands placed on them.

At the federal level, all the talk of debt blowouts is yet to be matched with any plan to bring the game back under control – that seems to be both a budget away for starters and an election away for fundamental change.

And with the Abbott government's polling already less than stellar, there's little reason for confidence about brave and bold solutions.

Michael Pascoe is a BusinessDay contributing editor.