While the sharemarket gets its knickers in a knot and property prices are in the doldrums, one very unlikely investment is on a roll.

If you'd bought government bonds with a 10-year maturity a month ago you'd be sitting on a nice little capital gain. And no threat of a profit downgrade, either.

There haven't been many times when you could not only get a good yield on a government bond - well above the inflation rate - but a capital gain as well.

The funny thing is that, while their prices rise and so yields on 10-year bonds have been falling - with little fanfare, it must be said, because I've only just noticed - those on cash have been rising.

If that looks schizophrenic it's because, just as the credit crunch has gone feral again, they've decided inflation is no longer a big threat.

As they push in opposite directions the gap between short and long bond yields is widening, which is a lot more ominous. This happens when the market is expecting a credit squeeze-induced recession - the higher shorter rates (of more than 8 per cent) show money is hard to get while the lower longer rates (10-year bonds are around 6.3 per cent) suggest the economy is slowing.

For a change the bond and sharemarkets are reading from the same song sheet. There's no mistaking they expect interest rates to drop next year.

So this is the time to be locking in these high rates, either in term deposits, bonds, or so-called hybrids, which are a cross between shares and bonds.

Although the best term deposit rates (around 8.5 per cent) are for six months to a year, you could be scratching around for a decent return when they mature. The yields on longer dated bonds are lower but there's the prospect of a capital gain if you sell them before maturity.

Most hybrids have the bonus of franking but are floating, which isn't much help when rates drop.

Even so, because they have a fixed margin above bank bill rates, they'll always be comparatively generous.

You can wait for new offers - the ANZ is likely to be next - or buy them in the sharemarket.

Unfortunately the only hybrid with a fixed rate - and at just above 11 per cent it's generous - was launched by Macquarie but bombed in the market because of its lower credit rating.

Its convertible preference shares with a face value of $100 are trading below $95. Still, that might yet prove to be a bargain.