Being an effective yield trader means understanding where the yield comes from but more importantly where the yield is going.
The new $USDC markets with @eulerfinance is a VERY interesting case for YT speculators.
Lemme show you how I'm playing this.
👇
📈 $USDC (Euler Yield)
Euler's $USDC yield vault provides liquidity to a range of tokens.
Our first part of research - how is their interest rate model set up?
As shown below, optimal utilization offers:
👉 7.5% Borrow APY
👉 6.75% Supply APY
🫳 Predicting yield
Gauging where the yield is going means understanding what types of collateral can borrow from the vault.
Notably, this vault supports Pendle PTs with 8-13% APY.
Let's think see this means for $USDC rates 🧐
↕️ APY Spread
PT holders are marginal borrowers until borrow APY ~= fixed yield - this is because it's ALWAYS profitable to borrow and loop.
In doing so, $USDC yields get driven way up.
In fact, $USDC yields are currently sitting at 8.92% APY while STILL profitable to loop!
💸 YT Return
Given YT's implied APY is 5.7% right now, we get the following RoI at different underlying yields.
It is RELATIVELY unlikely for underlying yields to decline that significantly as you'd expect spreads to be closed by new PT loopers 😋
🧠 Limit Orders
Now for the REALLY big brain part - you can set limit orders at a target implied APY using Euler's receipt tokens.
Order hits → leveraged yield exposure at a fat discount
Order doesn't hit → no problem
Literally no reason NOT to do this.
NFA ahahahahahahahah
PENDIDDLER
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