STOCKS | Andromeda's Alberto Gallo Says Bondholders Face Losses as Credit Spreads Stay Tight

Andromeda Capital Management UK LLP co-founder Alberto Gallo said credit markets are showing signs of extreme complacency, with credit spreads at historic lows and failing to reflect potential risks. According to Sina Finance, he warned that bondholders are heading toward losses as risk structurally shifts from equities and real assets into fixed-income assets, driven by a historic investment boom and surging government spending. Gallo said U.S. Treasury Secretary Scott Bessent faces an "impossible triangle": controlling the yield curve, avoiding cuts to the fiscal deficit, and maintaining a strong dollar. He said one of those three goals will have to give way, and that a weaker dollar is the most likely pressure valve. "Bessent is the captain, and bondholders are the passengers on the Titanic," Gallo said in an interview. He added that large-scale debt issuance in public and private markets, together with interest-rate hikes by central banks, has made bonds and credit assets unattractive on their own, while equities and commodities remain better supported. He also said credit spreads are "extremely narrow," financial conditions are too loose, and private credit is still supporting fundamentally weak companies. In the current cycle, he said, bonds cannot provide protection, and asset repricing is slow because private credit continues to refinance weaker borrowers, which will only magnify the eventual adjustment.