Creation of Euler T-Bill market on Ethereum

Euler DAO Markets
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Creation of Euler T-Bill market on Ethereum

Author: Euler Labs
Date: 2025-04-01

Summary

Stablecoin supply on Ethereum has reached record levels, coinciding with growing institutional interest in tokenized treasury bills and money-market funds. The Euler T-Bill market will create dedicated lending and borrowing facilities for these assets, enabling efficient capital allocation across both non-yield and yield-bearing stablecoins. This market aims to position Euler as a key infrastructure provider in the emerging tokenized fixed income sector, addressing institutional demand while expanding protocol functionality.

Specification

New assets

Non or low-yield bearing borrowable assets

USDC, USDT, USDtb, rlUSD, wM

Yield-bearing assets

sBUIDL, USYC, USDY, wUSDM, mTBILL, wUSDL

Risk Management

Euler T-Bill will be governed by Euler DAO and risk-managed by Gauntlet and Objective Labs. Euler Labs invites Gauntlet and Objective Labs to provide initial recommendations for risk parameters for the Euler T-Bill market.

Copyright

Copyright and related rights waived via CC0.

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Initial Risk Recommendations for Euler T-Bill

Thank you @EulerLabs for submitting this market creation proposal. Objective Labs is submitting the following initial parameter recommendations for this market.

Liquidation Loan-to-value Ratios (LLTVs)

Collateral on rows, debt on columns.

Asset USDC USDT USDtb RLUSD wM
USDC 0 0.975 0.975 0.975 0.975
USDT 0.975 0 0.975 0.975 0.975
USDtb 0.975 0.975 0 0.975 0.975
RLUSD 0.975 0.975 0.975 0 0.975
wM 0.975 0.975 0.975 0.975 0
sBUIDL 0.96 0.96 0.96 0.96 0.96
USYC 0.96 0.96 0.96 0.96 0.96
USDY 0.96 0.96 0.96 0.96 0.96
wUSDM 0.96 0.96 0.96 0.96 0.96
wUSDL 0.96 0.96 0.96 0.96 0.96
mTBILL 0.96 0.96 0.96 0.96 0.96

We recommend that the borrow LTVs be set to 1% less than the liquidation LTVs. The aim of these high LTVs is to enable high leverage on these low-risk assets. Combined with the oracle setup, we do not expect liquidations to normally happen.

Caps

All amounts are in USD.

Asset Supply cap Borrow cap
USDC 50M 46M
USDT 50M 46M
USDtb 50M 46M
RLUSD 50M 5M
wM 10M 9.2M
sBUIDL 50M 0
USYC 50M 0
USDY 50M 0
wUSDM 20M 0
wUSDL 20M 0
mTBILL 10M 0

IRMs

All rates are borrow APY.

Asset Base rate Kink Rate at kink Rate at 100% (max)
USDC, USDT, USDtb, RLUSD, wM 0% 92% 4.3% 15%

We recommend that sBUIDL, USYC, USDY, wUSDM, wUSDL, mTBILL remain non-borrowable. The interest rate model is designed to target the current short-term Treasury Bill rate.

Oracles

Asset Oracle Methodology
USDC Fixed 1:1 Fundamental
USDT Fixed 1:1 Fundamental
USDtb Fixed 1:1 Fundamental
RLUSD Fixed 1:1 Fundamental
wM Fixed 1:1 Fundamental
sBUIDL Fixed 1:1 Fundamental
USYC Hashnote USYC/USD Fundamental
USDY Ondo USDY/USD Fundamental
wUSDM Fixed 1.074:1 Fundamental
wUSDL Fixed 1.019:1 Fundamental
mTBILL Fixed 1.021:1 Fundamental

Euler Labs has chosen high-quality assets for this T-BIll market. Therefore we recommend the use of fixed 1:1 oracles for the borrowable stablecoins. These stablecoins are normally susceptible to peg volatility during stress or price manipulation attacks if less liquid (like USDtb, RLUSD, wM). Given the high LTVs we recommend for these vaults, we believe fixed rate oracles are warranted.

For USYC and USDY we recommend the use of an exchange rate feed published by the respective asset issuer. wUSDM and wUSDL are ERC4626 assets whose exchange rate can be obtained by using the convertToAssets function on the vault. However, to sidestep potential share price manipulation attacks we recommend that a fixed rate oracle be used for these assets. We recommend that mTBILL follow this pattern too. In practice the fixed rate can be updated quarterly without disruptions.

Incentives

We suggest an initial 1-month incentive campaign in rEUL for the borrowable stablecoins.

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Gauntlet - Parameter Recommendations for Euler T-Bill Market on Ethereum (2025-04-14)

Gauntlet is aligned with Euler Labs to initialize a market for tokenized money market funds to use primarily as collateral against stablecoin loans. The tokenized fixed income space presents a nascent and quickly growing opportunity in DeFi and its adoption in a lending market will help facilitate ramp-up for accredited users as well as the broader ecosystem.

Asset Scope

We support the initial choice of asset listing, with some notes and additional recommendations.

sBUIDL

sBUIDL is an ERC-4626 “sToken” wrapper on BUIDL, a BlackRock tokenized fund. There is currently slightly over 100K of sBUIDL supply (versus over 300M for BUIDL), and almost all of it is held by Elixir to back their algorithmic deUSD token.

BUIDL itself is rebasing, paying out dividends monthly in-kind to holders. The wrapping sBUIDL does not appear to be a repricing version of the underlying, and appears based on Elixir’s documentation to exist as a mechanism to primarily support onboarding liquidity in their deUSD token.

Therefore we request clarification on the benefits in listing sBUIDL as opposed to BUIDL, as well as how the rebasing nature of the token would affect interaction with Euler lending vaults.

wM

On a similar note, wM accrues yield to holders, so we would recommend accounting for this in configuring the fixed rate oracle (where Objective Labs currently recommends a 1:1 fixed rate).

DAI and USDS

We recognize that early institutional adopters of tokenized funds will be more risk averse and likely prefer centrally backed stablecoins like USDC and USDT versus those whose monetary mechanics are controlled by decentralized governance.

However, Sky, formerly Maker, has largely withstood the test of time with DAI, and perturbations in USDS have largely eased over the past several months as the DAI → USDS transition has unfolded. Sky has also recently committed over $1B of its funds to tokenized RWAs. We believe including these stablecoins in the proposed market will encourage broader DeFi support and provide users with extra liquidity venues with minimal additional risk. Such risk will also be factored into parameter recommendations below.

Cap Recommendations

We are mostly aligned with Objective Labs’ initial supply cap recommendations based on asset circulating supplies, liquidity, and market risk profile. To offset the recommended additions of DAI and USDS, we also propose increasing the sBUIDL supply cap to 100M, as this tokenized fund is exposed to the highest concentration of EOA holders.

We request clarity on the borrow cap recommended for RLUSD, as we would expect it to align with the remaining borrow caps in the absence of specific risk concentration for the asset.

We will also support making tokenized funds borrowable in this market, in order facilitate enhanced DeFi composability, as well as to open up possibilities for users in an environment where borrowing RWAs against stablecoin collateral may become desirable. We will initially recommend a borrow cap of 25% of the supply cap for these assets.

Asset Supply Cap Borrow Cap
USDC 50M 46M
USDT 50M 46M
USDtb 50M 46M
RLUSD 50M 46M
DAI 25M 23M
USDS 25M 23M
wM 10M 9.2M
sBUIDL 100M 25M
USYC 50M 12.5M
USDY 50M 12.5M
wUSDM 20M 5M
wUSDL 20M 5M
mTBILL 10M 2.5M

Interest Rate Curve Recommendations

Stablecoins

We understand Objective Labs’ rationale for recommending an IRM for stablecoins in this market where the optimal borrow APY matches the recent historical short duration US Treasury yield, in that such rates would entice growth in leveraged long t-bill strategies.

However, we believe that encouraging early supply of stablecoins in this market is essential, and in order to achieve that a combination of two primary factors is necessary:

  1. Incentives for the supply side
  2. Competitive base curve

The exact weighting of each of these is up for discussion, but we believe a competitive base curve is important at the onset.

We will assume and recommend zero reserve factor initially. In this case, with Objective Labs’ proposed IRM, the base curve offers ~3.96% supply APY at the kink. This is well below both Aave Prime and Core USDC’s kink supply APY of ~4.97%, as well as Euler Yield USDC’s at ~5.85% and Euler Prime USDC’s at 4.5%. We also note that top Morpho USDC vaults are offering base supply APYs upwards of 5.4%.

With Aave, both mainnet USDC markets are underutilized at 72-73%, offering supply APYs of ~3.13% (and thus borrow APYs even lower), without incentives. Users have ample opportunity to move their supply to other underutilized protocols where they would have similar or enhanced capital opportunities as well as improved yields in the face of incentives, including Euler, but opt not to. Therefore empirically a sizable proportion of onboarded supply can be “sticky,” and we recommend an IRM curve at least as competitive for suppliers as the one recently implemented for Euler USDC Prime, where future expected usage patterns combined with market forces will still allow for maximum utility for users.

We also recommend not artificially capping the maximum APY to 15% given the possibility of sporadic market fluctuations, as we have seen in the past, wherein the borrow rate at 100% utilization may briefly be better than the broader market rate at lower utilizations.

Asset Kink Kink Borrow APY Max Borrow APY
USDC, USDT, USDtb, RLUSD, wM, DAI, USDS 92% 4.89% 40%

T-Bills

A nominal recommendation is made for bootstrapping the market, with low expected initial utilization.

Asset Kink Kink Borrow APY Max Borrow APY
sBUIDL, USYC, USDY, wUSDM, wUSDL, mTBILL 25% 0.5% 40%

LTV Recommendations

LLTV

Here we aim to maximize risk-adjusted capital efficiency for users. We are aligned with Objective Labs’ general recommendations for this purpose, with slight adjustments downward for lower cap stables and for DAI and USDS to factor in governance risk. Given fixed rate oracles recommended, risk primarily exists in depeg events wherein users may be able to time loans to achieve true undercollateralization (we saw a recent such possibility with FDUSD). Liquidation risk is generally low in this configuration, primarily expected through accrued interest on stablecoin debt.

Rows below correspond to collateral assets and columns to debt assets.

Asset USDC USDT DAI USDS USDtb RLUSD wM sBUIDL USYC USDY wUSDM wUSDL mTBILL
USDC 0 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975
USDT 0.975 0 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975 0.975
DAI 0.97 0.97 0 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97
USDS 0.97 0.97 0.97 0 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97 0.97
USDtb 0.965 0.965 0.965 0.965 0 0.965 0.965 0.965 0.965 0.965 0.965 0.965 0.965
RLUSD 0.965 0.965 0.965 0.965 0.965 0 0.965 0.965 0.965 0.965 0.965 0.965 0.965
wM 0.965 0.965 0.965 0.965 0.965 0.965 0 0.965 0.965 0.965 0.965 0.965 0.965
sBUIDL 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0 0.96 0.96 0.96 0.96 0.96
USYC 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0 0.96 0.96 0.96 0.96
USDY 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0 0.96 0.96 0.96
wUSDM 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0 0.96 0.96
wUSDL 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0 0.96
mTBILL 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0.96 0

Borrow LTV

For the following collateral/debt pairs, borrow LTV is recommended as one percentage point less than the indicated LLTV:

  • Stablecoin/Stablecoin
  • T-bill/stablecoin
  • T-bill/T-bill

For the following collateral/debt pairs, borrow LTV is recommended as two percentage points less than the indicated LLTV:

  • Stablecoin/T-bill

Additional Considerations

  • Given the specialized nature of tokenized fund tech where KYC/AML requirements are commonplace, we recommend that Euler Labs either sets up or enlists liquidators that are permissioned across all assets in the market. Prudent attention is warranted here to ensure that accounts will be ready and able to absorb liquidatable positions.
  • The fixed rate oracles recommended by Objective Labs are reasonable to us in general given the market profile. We would recommend that the fixed rate used initially should be equal to assets divided by shares, where applicable, at or around the time of scheduling the transactions to initialize these oracles, and noted to the community at that time.
  • We can see demand for accredited investors in collateralizing borrows of assets outside of stablecoins, eg. long T-bill / short ETH. We open the floor to future discussions of enhanced collateral usage, while again keeping in mind how permissioning requirements can further complicate interactions for liquidators outside this specific market.

Next Steps

  • We welcome community feedback.
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