Bank deposit interest rates are still so low, so tedious in their predictability, and so discouraging for the fierce saver, it would seem that investors would be flocking to invest in equity markets.The opposite, however, is still true. Investors are still very leery of loss, while virtually and physically weary of the almost constant volatility. Some of this capital market volatility is investor in-the-mind perception, but much of it is very real.A review of the VIX (Volatility Index) chart since 2001 reveals six years of low volatility up to mid-2007, followed by the last five of years of significantly higher volatility.The VIX is the symbol for the Chicago Board Options Exchange’s volatility index that is a weighted mix of the prices for a blend of S&P 500 Index options, from which implied volatility is derived.In simple terms that most of us can reference best, the VIX index increases when capital markets are volatile, and drops when capital markets perceive stability in economic outlook.Uncertainty and volatility will, no doubt be evident again as investors in the United States try to determine which strategy will help them hedge against the tax impact of the impending so-called tax fiscal cliff.Those tax rate reversions dating back to President George W Bush’s tenure (and expiring December 31, 2012) will raise tax costs for dividends and capital gains, among other items. US person investors are taking the opportunity before year-end to capitalise on reduced taxable gains by liquidating highly appreciated portfolio positions.Security proceeds will then need homes in new US tax compliant investment vehicles.However, US tax increases for certain investments will not affect foreign nationals holding US securities since US dividend payment tax is already withheld at 30% at source while capital gains on US securities remain nontaxable.Bonds, particularly sovereign (government) debt bonds, as a prevailing theory are thought to be less volatile, and safer than investing in stocks.After all, aren’t most governments in the OECD environment considered stable and secure? Governments don’t generally default on their debt, do they?What will a bond do for you that a stock or bank deposit won’t? Well, a constant (and possibly higher) coupon interest rate, for one, through the maturity date of the bond.Locating a great interest rate on a ten-year maturity bond in a very low interest rate environment appears pleasantly profitable to interest-starved investors.The Bloomberg website bond site has launched a new expanded bond research section.This is a welcome addition for small investors enabling detailed current review and research on domestic and global bonds. Bonds are as important to a portfolio as stocks and should be just as diversified across the global bonds spectrum.The contrast in valuations and rates between government bonds from successful EURO zone economies with those countries struggling under severe debt has been a commonplace investment news focus.Looking at the attached recent Bloomberg chart listing global bond interest yields on ten-year maturity bonds, we see the following:In the Americas, United States — 1.68%Canada — 1.75%Mexico — 5.46%Brazil — 9.51%EuropeGermany — 1.43%Britain — 1.85%France — 2.18%Italy — 4.84%Spain — 5.71%Netherlands — 1.70%Portugal — 7.90%Greece — 16.75%Switzerland — 0.50%This is an illuminating snapshot chart, particularly, when reviewing the differences in interest rates between the EURO zone countries. Why are there such dramatic spreads between Germany and Portugal and Britain? Note the dramatic interest rate ranges between the US, Mexico, Brazil, and the most controversial of all, Greece.Blinded by the rate of return.At a first glance, these higher interest rate bonds are terrific! Imagine purchasing a tranche of Greek bonds paying 16.75% per year.You’d double your money in five — six years. Yet, we know from news media that the Greek government message of austerity and belt tightening across the country has received hostile reception from the Greek populace. How can this government even begin to contemplate such a highly financed debt plan?This should be your first question, and possibly the only question. The answer is not simple.Every considered government bond security purchase should be evaluated, at a minimum, for certain serious criterion: credit worthiness, ability to repay interest (and principal), country economic conditions.If you are interested, the challenge this week is to selectively track a country, say Spain, through Bloomberg and related sources.Don’t forget to review what the European Union Central Bank and Germany think about the Spanish banking system and economy.You tell me after, weighing all these factors, whether Spanish Government Bonds are a good investment.n For detailed Sources, see The Royal Gazette electronic editionandBloomberg: www.bloomberg.com/markets/rates-bonds/Understanding the VIX Indicator.Http://www.investmentu.com/2012/March/vix-indicator.html www.bloomberg.com/news/2012-11-22/spain-sells-eu3-88-billion-of-bonds-beating-goal-as-costs-fall.htmlMartha Harris Myron CPA PFS CFP (USA) TEP at Patterson Partners Ltd provides integrated cross-border tax, estate, investment advisory and related strategic planning services in Bermuda. She is a member of the American Citizens Abroad Professional Tax Advisory Council. www.americansabroad.org.For additional information, mmyron@patterson-partners.com or call 296 3528 http://www.patterson-partners.comNote: The author does not own Spanish bonds. This article is for general educational purposes only and is not intended as tax, investment, or retirement advice, and cannot be relied upon for any personal financial planning purposes.