Goldman Sachs co-CEO Anthony Gutman has called for governments to exercise greater fiscal restraint, warning that the world is "awash in debt" as borrowing costs surge across major economies. His comments come as benchmark bond yields in the United States, United Kingdom, Japan, and France reach levels not seen in decades, driven by escalating government debt and persistent inflationary pressures.
The US 10-year Treasury yield has been trading near historic highs, hovering around 5.27% after briefly surpassing 5.3% earlier this week—its highest level since April 2002. The 30-year yield also spiked to 5.7% before easing slightly. Similar trends are evident globally, with the UK 10-year gilt reaching 5.5% before retreating to 5.3%, and France's 10-year yield climbing to 4.74%.
Gutman's Call for Fiscal Prudence
Speaking to CNBC, Gutman emphasized that lower fiscal deficits are essential to combat inflation and stabilize borrowing costs. "We all know what's driving it. We're focused on energy costs, we're focused on the labor market. But fundamentally, what do we need to solve this problem? We need lower fiscal deficits, and we need more durable economic growth," he said. He expressed hope for a combination of reduced spending and stronger growth to address the mounting debt burden.
Gutman's remarks come amid an upcoming election cycle in Europe, which he noted is adding to policy uncertainty and complicating the challenge. Political instability in the region, coupled with ongoing conflicts in the Middle East, has heightened concerns about inflation and further rate hikes.
Why Yields Are Rising
The sharp rise in bond yields is largely attributed to ballooning government debt in Western nations, combined with fears of additional interest rate hikes to tame inflation. The US national debt has surpassed $40 trillion and continues to climb, while a historic spending boom in artificial intelligence has intensified competition for capital, further pushing up borrowing costs.
Energy prices have also played a role, with Middle East conflicts driving crude oil prices higher and increasing the risk of an inflation surge. Central banks, including the US Federal Reserve, have already raised rates—the Fed's first hike in three years—and further increases are widely anticipated, keeping upward pressure on yields.
Goldman Sachs Warns of Debt Sustainability
A separate Goldman Sachs report cautioned that persistently higher interest rates could strain US government finances further. Strategist Pierfrancesco Mei projected that the debt-to-GDP ratio could reach 132% by 2035, 10 percentage points above the baseline. The report also forecasts one more Fed rate hike in December, followed by three cuts starting in the second half of 2027.
Japan's 10-year yield has risen to a three-decade high, while the UK and France are experiencing similar sell-offs. These developments underscore the fragility of global bond markets and the urgent need for fiscal discipline, according to Gutman.
This article is for informational purposes only and does not constitute financial advice.
