The government bonds of the major industrial nations continue to improve as attractive investments.

Deregulation, the removal of withholding taxes and better liquidity are all helping to transform even the smaller markets into investment opportunities.

The easiest way to invest in these various government markets is through international mutual bond funds.

Possibly the only fund that invests solely in international government bonds is the GT Global Government Income Fund of San Francisco. Many international bond funds have the preponderance of their assets invested in international government securities. For instance, the T. Rowe Price International Bond Fund, with a current yield of 9.3 percent over the past 30 days, is 90 percent in foreign governments.

Morningstar Inc., a Chicago mutual fund analysis group, notes that from the standpoint of total return, its International Bond Fund average has out-performed both its Domestic Taxable Bond Fund average and its Domestic Government Bond Fund average through the first 8 months of the year. (The international average was up 8.01 percent compared with less than 2 percent for the other two.)

One reason for this is the decline of the dollar. However, it's anybody's guess what would happen to the world's bond markets should a shooting war erupt in the Middle East.