Retirees and investors splashing cash into offshore bond markets will have to keep an eye on global spending, as economists warn that a stable source of long-term income could prove costly.
Bonds are government and corporate debts that don't need to be paid until the end of a specific period.
However, more political spending is leading to greater concern that governments won't be able to pay off their debts, seeing investors put less money in long-term bonds, IG's market analyst Tony Sycamore says.
The spending has prompted a rise of bond yields, which is a percentage for how much investors expect to receive at the end of the year, relative to the price of the bond.
Mr Sycamore says if the price of bonds moves lower, the yield trends higher, meaning investors and retirees who have put money into the market would lose cash.
"So the idea (of investing in the bond market) is trying to build a nest-egg of wealth and bonds offer a really stable return without the big fluctuation that you get with equities," he told AAP.
"You're going to lose money if the value of the underlying bond goes down and it won't be fully compensated by the yield which you're getting."
Mr Sycamore also says greater government spending is not being offset by revenue growth.
He said US President Donald Trump is an example as he aims to "politicise" the Fed, with the aim of bringing down interest rates that could raise inflation, which bond yields respond to.
Along with the Big Beautiful Bill that saw tax exemptions, it means the US government's debt will only grow as there is less revenue to counter greater spending.
The US 30-year bond yield climbed more than five basis points to 4.977 per cent on Tuesday.
This rising pattern is seen across the world with the UK bond yield rising to a historic 5.723 per cent on Tuesday - the highest since 1998.
In Japan, the government's 30-year government bond yield surged more than 100 basis points to 3.286 per cent.
Mr Sycamore said if rates of 30-year bonds were to rise above 5.15 to 5.2 per cent, a snowball effect could ensue as big hedge funds that hold assets in bonds would push the yield higher.
"They don't care about valuations, they don't care about fundamentals. They just look and go 'Hang on, that's a big break… and they could push the yield on the 30-year from say 5.2 per cent up to 5.5 per cent and onwards very, very quickly because they are so big," he says.
"It becomes a bit of a vortex because what it means is the interest the US government has to pay on its $37 trillion worth of debt becomes significantly more.
"That snowballs as well, so less and less people say 'Well hang on, the US government may have trouble paying back all this debt, I want six or seven per cent."
NAB's Ken Crompton said regulatory reform in Europe is also seeing investors buy less long-term bonds, meaning governments are struggling to find buyers.
Outside of the RBA, more than 65 per cent of Australia's bonds are held offshore, and Mr Crompton expects long-term bond yields to steepen, putting Australia in murky waters.
"Some of those holdings are relatively sticky, so it's not necessarily clear whether there could be significant implications for them," the head of NAB's rates strategy told AAP.
"We don't see the longer-term bond yields coming down materially even with rate cuts coming through."
