Disclosure: This newsletter is for informational purposes only and does not constitute financial advice. Always DYOR before making any investment.

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A Tale of Two Yields

There is a significant divergence happening in DeFi yields right now, and it can be seen in the sUSDe term structure on Pendle. The sUSDe term structure is effectively a market-implied funding rate curve. Because sUSDe yield is derived largely from shorting perpetual futures, its yield curve tells us exactly how much leverage traders expect to be in the system over time.

• High Yields = High Leverage Demand (Bullish/Greedy)

• Low Yields = De-leveraging (Cautious/Defensive)

The current yield chart shows a steep separation between sUSDe (solid blue Line) and the broader stablecoin market (dashed green line).

• sUSDe: Has flatlined at ~4.4% near its current funding rate. This signals that demand for leverage has cooled off significantly across crypto.

• Stablecoin market: Short-term maturities still offer fixed yields of 10%+. This suggests that speculative demand has rotated elsewhere to chase new airdrop programs or incentives that are still running hot.

Takeways

• Stop chasing sUSDe for yield: The easy money here is gone. A 4.4% fixed return is barely beating inflation.

• Follow the market: The 10% spread (14% vs 4%) signals that the real volatility and opportunity have migrated to newer or more incentivized stable pools. If you are actively farming stablecoin yields, that is where you should be looking.

• The macro takeaway: sUSDe is the canary in the coal mine. It cooled off first. The curve predicts the rest of the market will follow suit.

• yoEUR: ⬆️ Strategic rebalancing to Ethereum pools. Shifted significant allocation to Ethereum mainnet to capture a >100 bps yield premium. This move capitalizes on deeper liquidity and heightened leverage demand on L1 compared to current L2 opportunities.

  

• yoUSD: 🆕 integrations. Deployed capital into Morpho V2 and Aave USDG markets. The vault is now positioning itself to harvest elevated borrowing rates driven by leverage loopers and aggressive incentive programs.

  

• yoETH: 🆕 Added StakeDAO cbETH-WETH. While recent spikes in ETH borrow rates have compressed margins on stETH leverage loops, the vault is opportunistically rotating into incentive-heavy pools to offset costs and benefit from market volatility.

  

 View all vault allocations ↗

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Vitalik calls out the current state of L2s 👀