A financial market analyst says the New Zealand market is still exposed to troubles in Europe, even though the region might appear to be on a firmer footing.
Harbour Asset Management head of fixed interest Christian Hawkesby says the situation seems to have calmed down, with new governments in place who have been taking their countries' financial difficulties seriously and introducing structural reforms and austerity measures to get their books back in order.
However, he says, now the challenge is for those governments to implement their reforms as promised and not kill off too much growth in the process.
He says any new concerns could see New Zealand bond yields fall as global investors turn to this country as one of the safe havens for investment.
Mr Hawkesby says there is also a danger that the markets where banks get their funding could close down as they did in the fourth quarter of 2011 in response to worries about the viability of the global banking system.
Australasian banks had been taking advantage of the reopening of those markets to stock up on long-term funds, but the sources of funding could close down again if trouble flares anew in Europe.
He says the yields of Spanish and Italian government bonds will be monitored closely because they are a barometer of the markets' confidence in those nations' ability to deliver on their austerity plans.