The latest developments in bond markets are no longer related to economic fundamentals and have become quite bizarre, the head of the French debt management office said on Thursday.
Swedish and German debt agency officials also expressed concern, urging policymakers to do more to calm tensions after a week when borrowing costs have risen significantly for France, Austria, the Netherlands and Finland -- four countries previously viewed as ultra-safe investments.
You start to see over the last few days price actions which are honestly quite bizarre, French AFT Chief Executive Philippe Mills said at the Euro Finance Week in Frankfurt.
What is clear is that you have a market environment which has recently developed and which has its own dynamic, its own self-fulfilling prophesy in a way, which is very far from any evaluation of any elements of fundamental analysis of whatever country.
His Swedish counterpart Thomas Olofsson told Reuters that the current situation was not sustainable and urged the euro zone to find a way to put the market back on a more even keel.
We can't get used to this situation, something must give and all sorts of issues need to be resolved, he said.
Some measures will be needed but whether it will be political measures or the European Central Bank stepping in, I wouldn't like to express an opinion.
If you compare monetary policy in the U.S. and the UK and so on there are of course arguments for the ECB to take this seriously.
Carl Heinz Daube, the head of German's debt agency, also called for authorities to take control of the situation.
We need some kind of institution which is powerful to support the next steps ... It might be the ECB, it might be the EFSF (bailout fund), it might be the ESM (the planned successor to the EFSF) or something new, he said.
The ECB has been buying bonds in the open market to try to hold down the borrowing costs of troubled debtor economies, but only in relatively small quantities, held back by German-led protests that it cannot afford to compromise its independence or fuel inflation.
Many economists and some world leaders say it must play a much bigger role, acting as a lender of last resort, to resolve the crisis.
France's Mills also said an error last week by ratings group Standard & Poor's was quite disturbing in these extremes of nervousness of markets.
S&P accidentally released a report saying France's triple-A rating had been lowered, only to correct itself hours later.
It has cost us money, Mills said, noting that France's borrowing costs had not fallen back to where they were before the error.
(Reporting by Marc Jones and Eva Kuehnen; Editing by Ruth Pitchford)