Goldman Sachs has raised concerns about the impact of higher government bond yields and persistent fiscal deficits on financial-market stability.

Anthony Gutman, co-CEO of Goldman Sachs International, said governments need to bring down budget deficits while supporting stronger and more sustainable economic growth. His comments came as investors continued to monitor volatility in major sovereign bond markets.

Gutman pointed to recent movements in US Treasury yields and French government bonds as evidence of growing pressure in global debt markets. The Goldman executive argued that reducing government spending and achieving more durable economic growth could help ease borrowing costs.

The warning comes at a time when higher bond yields are increasing the cost of government borrowing and potentially putting additional pressure on companies and households.

The US 10-year Treasury yield was around 5.26% on Monday, while France's 10-year government bond yield moved close to 4.88%, according to the reports.

Gutman said policymakers face difficult trade-offs because governments must balance economic support with efforts to control debt and borrowing requirements.

Political uncertainty is adding another layer of risk. With European countries entering important election cycles, Goldman Sachs believes businesses may face greater uncertainty over future economic and fiscal policies.

Gutman said a combination of lower public spending and stronger economic growth would provide greater confidence to investors and businesses.

While warning about the broader bond market, Goldman Sachs is also identifying opportunities in the European utilities sector ahead of the next earnings season.

The investment bank expects RWE, Naturgy, Enel and Energias de Portugal (EDP) to potentially deliver results strong enough to exceed their full-year guidance. Goldman sees trading activity, flexible power generation, pumping hydro and robust electricity demand as important earnings drivers.

Goldman Sachs estimates that RWE could report nine-month net profit of around €1.6 billion to €1.7 billion, equivalent to roughly 75% of the current full-year Bloomberg consensus estimate.

The bank expects flexible generation and energy trading operations to provide potential upside.

For Spain's Naturgy, Goldman projects nine-month EBITDA of approximately €4.3 billion to €4.4 billion and net profit near €1.75 billion.

The bank believes the company could exceed its full-year profit guidance if fourth-quarter conditions remain normal, supported by gas prices and flexible generation.

Goldman expects Enel to report around €17.8 billion in nine-month EBITDA and €5.7 billion to €5.8 billion in net profit.

Strong electricity consumption in Italy and Spain, together with flexible generation and trading activity, could support earnings growth.

Goldman also sees upside potential for Energias de Portugal (EDP). The bank estimates third-quarter EBITDA at nearly €1.2 billion and expects pumping and flexible generation to contribute strongly.

EDP's full-year EBITDA guidance of €5.3 billion could prove conservative if expected asset-rotation gains and operating performance materialise.

Goldman Sachs' latest outlook highlights two contrasting themes in global markets.

On one side, high fiscal deficits and rising bond yields are creating pressure on governments and increasing financing costs. On the other, specific sectors such as European utilities could benefit from strong electricity demand, commodity-price volatility and flexible power-generation assets.

The bank's message suggests that investors will be watching both macroeconomic policy and corporate earnings closely in the months ahead.

For governments, the priority is fiscal discipline and sustainable growth. For equity investors, upcoming earnings reports could determine whether Goldman Sachs' positive view on selected European utility stocks translates into further market gains.