IGA CAPITAL ECONOMIC BRIEF: WEEK OF NOVEMBER 3, 2025
- Joshua Hawley
- Nov 4
- 3 min read
The Illusion of Stability: Policy Rates, Credit Expansion, and the Fiat Mirage
The market's persistent reliance on centrally planned monetary accommodation has driven forward rates into territory that is structurally misaligned with the economic reality of credit risk and inflationary pressure. The current environment is a predictable consequence of discretionary monetary intervention, creating a financial landscape defined by artificially low capital costs and signaling the potential for widespread malinvestment.
The Fictitious Price of Credit (Monetary Policy & Fixed Income)
The central bank's continued manipulation of the money supply transmits a distorted, low price signal into the credit markets, misallocating savings and incentivizing debt-fueled consumption.
Implied Policy Rate: The market has priced a rapid descent into monetary ease, with the Fed Funds Effective Rate currently at 3.87%. Futures markets imply the Fed will settle at 3.71% by the December 10th meeting, with the long-term target sinking to approximately 3.10% by mid-September 2026. This systemic intervention establishes a foundation for continued credit expansion.
Yield Curve & Credit Risk: Despite the easing trend, the market is pricing for risk. The 2s/10s UST Spread has expanded to 0.51%, and the 5s/30s UST Spread stands at 0.97%, confirming a steepening yield curve. This divergence between short-term rate suppression (SOFR at 4.00%) and long-term yield persistence (10-year UST at 4.09%) is a Misesian signal that market participants demand greater compensation for the extended risk inherent in long-duration capital.
Global Benchmarks: The U.S. Federal Reserve's policy dictates global funding costs. The 3-Month EURIBOR is stable at 2.023% (as of Nov 3, 2025). The 3-Month EIBOR, operating under a currency peg, was recently at 3.581070% (as of Oct 31, 2025).
Real Value Indicators (Commodities and Inflation)
The true cost of fiat currency degradation is reflected in the continuous high velocity of assets outside the direct control of the central bank.
Sound Money Premium: The flight from fiat is evident in precious metal performance. Over the last month, Gold has gained 3.6% to $3,997.76, and Silver climbed 3.7% to $48.70. This is not merely speculation; it is the market's collective judgment on the declining purchasing power of the dollar.
Inflation Persistence: Inflation remains a structural issue, with the latest available US Headline CPI at 3.00% (YoY, Sep-25) and Core CPI at 3.00% (YoY, Sep-25). This persistence confirms that the expansion of the money supply continues to outpace real output.
IGA INSIGHT
The Credit Cycle Contradiction
The market is exhibiting a classic Wicksellian divergence: monetary rates are below the natural rate of interest, leading to the distortion of capital allocation. This is evidenced by the growing risk premium in the long-term yield curve and the continued enthusiasm for assets like the S&P 500 (6,840), which are benefiting from the low-rate stimulus. The recent CLO ETF outflows are a leading indicator of impending credit contagion in leveraged markets, which will inevitably surface as the artificially engineered boom reaches its inevitable correction. IGA Capital's strategy remains anchored in sound financial principles: utilize the short-term capital efficiency afforded by the SOFR/EURIBOR environment while strictly avoiding malinvestment in non-productive, centrally subsidized ventures. Liquidity remains paramount.
Footnotes and Disclosures:
Source: Bloomberg
Sources: Walker & Dunlop
Data on Fed Funds Rate Target Probabilities: CME Group
3-Month EURIBOR (November 3, 2025): Euribor-rates.eu
3-Month EIBOR (October 31, 2025): Central Bank of the UAE
UAE Finance Requirements: IGA Capital Brief
Digital Assets (October 27, 2025): Real-time Crypto Exchange Data
CLO ETF Sell Off/Appraisal/Holiday Forecast: IGA Insight Brief
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