Investors can find value and safety in the Australian bond market amid the uncertainty of overseas markets continuing into 2012.
"Australia has kept its AAA rating so we may not be a safe haven [but] people see us as a safe haven bond market," Tyndall AM head of bonds Roger Bridges said.
"There's still a lot of value in the bond market, even though the risk-free curve looks very expensive at the present time."
Bridges said the Australian dollar continued to demonstrate its strength throughout 2011.
"The paradigm around it that it's in fact fairly safe has possibly changed the nature of our monetary policy, how our economy's going to work, and mostly how the bond market's going to react in the future," he said.
Loose monetary policies in Europe and the United Kingdom have resulted in "currency wars", which is pressuring the Australian dollar.
Bridges said his main concern is the Reserve Bank of Australia's reaction if European economies deteriorate further.
"If they start introducing a level of policy like what's going on offshore, it really means that we may overheat our own economy," he said.
"The issue's going to be, if inflation comes off with the high Australian dollar, can they afford to keep cutting rates? That's going to be a problem because you've got this very loose monetary policy overseas, which is set to where their conditions are and not [ours].
"So yes, we may see cuts, but not as much as the bond market is suggesting at the moment."
However, he predicted rates would remain relatively low because the Australian market was too small to take on considerable foreign borrowing.
"The strong Australian dollar is changing and how it's reacting in these types of crises is changing our economy, how people are spending and also some of the investment markets locally," he said.
