Western governments are expected to benefit from another year of "easy money" as the appetite for bonds among investors in Asia and oil-producing countries continues to allow them to raise cash cheaply, analysts say.
Asian countries, aiming to keep their currencies low to help exports, have been busy buying government-issued debt and financing it by printing money.
And oil-producing countries, awash with petrodollars after a tripling of oil prices in the last four years, have also been investing their gains in bonds issued by Western governments.
The surge in liquidity, which dates back to the Asian financial crisis in 1998 when central banks injected cash to stimulate activity, has enabled governments to issue bonds with extremely low interest rates.
Interest rates determine the annual payments made to bondholders and reflect the perceived risks of the investment.
In the current "easy money" climate, yields on bonds have fallen to historic lows: yields on US 10-year bonds are about 4 percent while eurozone 10-year bonds have a yield of about 3.5 percent.
This benign environment has encouraged governments to refinance their debt and issue new bonds with lower interest rates, helping to reduce the costs of servicing national debt piles.
"Today, states are refinancing without any difficulty. We are in an era of easy money," BNP-Exane economist Emmanuel Ferry.
Ferry pointed out the French government had recently been able to issue a 50-year bond for the first time. The success of the bond has led to copycat moves in other capitals.
A 50-year bond is intrinsically risky because of the lack of visibility over a 50-year period. Bonds mature at the end of their lifespan and are repaid by the borrower.
The great fear of the market for the past three years has been a sharp hike in long-term interest rates, which would raise the cost of borrowing and could lead to a collapse in the housing market.
Economic growth in a number of countries, notably the English-speaking trio of the US, Britain and Australia, has been fuelled by galloping property markets.
"In an over-indebted world drunk on financial excess, the worst case scenario is a sharp increase in long-term interest rates," said Emmanuel Lechypre, head of economic research at French monthly business magazine L'Expansion.
"The housing market would not resist it," he said. "Fortunately, this scenario is unlikely in 2006."
The US is the most exposed to this risk because of its soaring current account deficit, which could reach 6.7 percent of gross domestic product this year.
However, nothing indicates at present that the win-win relationship between the US and Asia -- Asia investors are among the biggest investors in US-denominated assets -- is about to crumble.
Inflation remains under control after a cycle of interest rate hikes by the US Federal Reserve and the US economy is set to continue to be one of the driving forces behind global expansion.