This proposal seeks approval to integrate PT-eUSDe-29MAY2025 as collateral on the Euler Yield market. We believe this will allow Euler DAO to strategically expand its competitive stablecoin yield offering, capture current demand for eUSDe, and stimulate mutual growth with Ethereal.
Motivation
eUSDe is the receipt token of the pre-deposit vault of Ethereal, the flagship spot and perp DEX on Ethena Network. PT-eUSDe is currently the most liquid pool on Pendle (~$150M) with implied yield at ~12%. Euler is enrolled in Ethereal’s points program with competitive terms for both eUSDe and PT-eUSDe deposits.
Risk
In addition to the risks of eUSDe as identified by Gauntlet and Objective Labs, we believe the PT token does not add further material risks. Pendle smart contracts are thoroughly battle-tested by time and TVL. PT-eUSDe is the most liquid pool on Pendle. Pre-deposited eUSDe is instantly withdrawable 1:1 to USDe, making for a highly liquid path from PT to any stablecoin. Finally, Euler Yield hosts only USD-derivative assets, so we do not expect liquidations to happen in the normal case.
Caps
Supply Cap
Borrow Cap
5M (~$5M at expiry)
0 (borrowing disabled)
Objective Labs recommends that PT be non-borrowable in line with strategy for PTs.
Liquidation LTVs
Debt
LLTV
wM
82%
USDT
82%
USDS
82%
USDe
90%
eUSDe
90%
USDC
82%
USD0
82%
RLUSD
82%
PYUSD
82%
FDUSD
82%
DAI
82%
In line with the rest of the market, Objective Labs recommends that the borrow LTV should be set to two percentage points less than liquidation LTV.
Interest Rate Model
The IRM can remain unset since PT-eUSDe will be non-borrowable.
Oracle
We propose that a Pendle PT market oracle be used, crossed by eUSDe’s ERC4626 conversion rate, crossed by Pyth USDE. The latter part of the same oracle configuration matches the one used for eUSDe.
Author
Objective Labs is a service provider for Euler Labs tasked with product development, risk management, and incentive optimization. Objective Labs is Euler-aligned.
Hey @Objective, eUSDe as a loan asset against PT looks very cool, but it’s inactive to borrow. What risk-recommendations would you consider (irm, borrow cap and oracle)?
[Gauntlet] Parameter Recommendations for PT-eUSDe-29MAY2025 on Euler Yield (2025-03-28)
In light of the proposal by Objective Labs, Gauntlet recommends the following risk parameters to the protocol:
Cap Recommendations
Gauntlet will recommend this asset is not initially borrowable given its limited such utility as a maturing PT.
Set supply cap to 40,000,000
Set borrow cap to 0
Presently PT-eUSDe can withstand over 50M swap to SY-eUSDe in Pendle AMM with less than 1.5% price impact. Subsequent rationale follows that in our 03/27 proposal for updating the eUSDe supply cap.
We are aligned with the risk profile of the oracle recommended by Objective Labs. Using a Pendle PT oracle would continually allow the PT-eUSDe / eUSDe price to converge to market price based on implied APY and tenor within reasonable time.
Interest Rate Curve Recommendations
This asset is recommended to not be borrowable initially, so no IR curve need be set.
LLTV Recommendations
Here we aim to maximize risk-adjusted capital efficiency for users. We anticipate usage of markets for looping PT-eUSDe / stablecoins, PT-eUSDe / eUSDe, and PT-eUSDe / USDe.
This table assumes PT-eUSDe as the collateral asset.
Borrow LTVs are recommended as four percentage points less than the recommended LLTVs per collateral/debt pair.
Debt
LLTV
wM
86%
USDT
86%
USDS
86%
eUSDe*
92%
USDe
90%
USDC
86%
USD0
86%
RLUSD
86%
PYUSD
86%
FDUSD
86%
DAI
86%
eUSDe Borrow Recommendations*
As pointed out by @daffy, borrowing is not currently enabled for eUSDe. As part of the recommendations for this asset, we also recommend enabling eUSDe borrows.
Cap Recommendations
We recommend setting the borrow cap to 50% of the supply cap (which our current proposal recommends at 40M). Borrowing demand will be expected for PT-eUSDe / eUSDe looping. We would like to support capital efficiency while noting heavy usage of eUSDe as collateral for looping eUSDe / stablecoin positions. Therefore borrowing should be limited to the extent that sufficient redemption capacity will exist for liquidators during long tail events.
Interest Rate Curve Recommendations
Since mid-February, Pendle implied APY for eUSDe has decreased from 17.9% to 11.3%. Noting this trend, we recommend the following IRM: