Cut spending to curb runaway borrowing costs, Goldman's Gutman tells governments

• U.S. 10-year Treasury yields stood at 5.26% while French 10-year bond yields reached 4.88%, reflecting elevated borrowing costs across Western markets
• Gutman identified lower fiscal deficits and more durable economic growth as the fundamental solutions needed to curb surging yields
• Europe's ongoing election cycle is creating policy instability and uncertainty for businesses, making fiscal trade-offs more challenging to address

Summary

Goldman Sachs International co-CEO Anthony Gutman warned that Western governments must reduce spending and boost economic growth to address surging borrowing costs affecting major economies.

Key Points:

Speaking on CNBC's "Squawk Box Europe," Gutman identified rising government bond yields as a widespread challenge, citing recent volatility in U.S. Treasurys and French government bonds. He emphasized that lower fiscal deficits and more durable economic growth are essential to solving the problem.

Market Data:

• U.S. 10-year Treasury yield: 5.2581% (down 1 basis point)
• French 10-year bond yield: 4.8812% (up more than 1 basis point)

The yields climbed Friday despite weaker-than-expected September nonfarm payrolls data, indicating persistent market concerns about fiscal sustainability.

Political Context:

Gutman highlighted Europe's ongoing election cycle as a source of policy uncertainty and instability for businesses, making fiscal trade-offs "more challenging" for governments. His comments coincided with Spanish Prime Minister Pedro Sanchez's announcement of a snap election scheduled for November 29.

Market Implications:

The Goldman executive's remarks underscore growing investor anxiety about government debt levels across Western economies. Rising borrowing costs could constrain fiscal policy flexibility and pressure governments to implement austerity measures. The combination of elevated yields and political uncertainty may create headwinds for equity markets and complicate monetary policy decisions for central banks.

Gutman expressed hope that a combination of reduced government spending and stronger growth would provide market comfort, though the current political environment makes implementing such measures difficult.