Author: @Web3Mario (https://x.com/web3_mario)

Summary: In the previous article, we discussed the manifestation of interest rate risk in the leveraged yield strategy of AAVE's Pendle PT, and many friends provided positive feedback, for which I thank you all. Recently, I have been researching market opportunities in the Pendle ecosystem, so this week I hope to continue sharing an observation on the Pendle ecosystem, namely the real yield and risk of the YT leveraged point strategy. Overall, taking Ethena as an example, the potential return rate of the Pendle YT leveraged point strategy can currently reach 393%, but it is still necessary to be cautious of the investment risks involved.

Utilizing the leverage property of YT assets to speculate on the potential yield of Point

First, let’s briefly introduce this yield strategy. In fact, at the beginning of 2024, with LRT projects represented by Eigenlayer choosing to use the point mechanism to determine future airdrop reward distribution, this strategy has gained market attention. Users can leverage the purchase of Pendle YT to increase capital leverage, obtain more points, and thus secure a larger share of rewards during the distribution.

The reason why purchasing YT assets has the effect of increasing capital leverage lies in Pendle's mechanism. We know that Pendle transforms yield-bearing token credentials into Principal Token (PT) and Yield Token (YT) through synthetic assets. A yield-bearing token can be converted into one PT and one YT, where PT is a zero-interest bond that can be exchanged 1:1 for the native asset upon maturity. Its fixed interest rate is determined by the discount ratio of PT relative to the native asset in the secondary market created by the current Pendle AMM, along with the remaining duration. YT represents the ability to accumulate earnings of a locked yield-bearing asset during its duration. Holding one YT is equivalent to possessing the right to earnings of a native asset for a certain period in the future.

Since holding YT only grants the right to earnings, without the ability to redeem the principal (this part is carried by PT). Therefore, as the maturity date approaches, the remaining value of YT will become smaller and smaller until it reaches zero at maturity. Of course, this does not mean a loss of value; it simply means that part of the value has already been realized as rewards and distributed to YT holders. In other words, after holding YT for a period of time, you will notice two phenomena:

1. The value of the YT you hold is decreasing;

2. On the Pendle Dashboard page, you will see some claimable rewards;


The leverage capacity of YT funds originates from this. Since it only grants the right to earnings, the price of YT is far below that of a yield-generating asset. Therefore, buying YT means you can use a small amount of capital to leverage a larger yield-generating asset scale to capture earnings. Taking the YT sUSDe price on July 25 as an example, if the market price of YT is 0.0161 USDe, it means that if you assume your capital is 1 USDe, you can purchase 62 YT. This means that within the next 66 days, you will obtain the rights to 62 USDe of earnings, which is the essence of capital leverage.

Of course, since there is no ability to redeem the principal, this strategy can only be established when future earnings are at least higher than the principal invested in YT. Here, we will do a simple calculation. As shown in the figure, the current official annual interest rate of sUSDe is about 7% (capital fee dividend). Assuming that the fee level remains unchanged for the next period, the interest rate for users holding for 66 days is about 1.26%. However, the capital leverage of purchasing YT is only 62 times. Doesn't this mean that investing in YT will only yield approximately 62 * 1.26% ≈ 78% at maturity? This basically means that investing in YT yields no extra earnings, and there may even be some losses. From the figure, we can see that the recent implied interest rate and actual interest rate show a converging trend; however, for most of the previous time, the interest rate spread was still large, which means that during that period, the price of YT might be lower, leading to the strategy being in a loss state. This is also the reason why I did not choose to focus on this strategy a year ago.

However, that is not the case, because in our rough calculation above, we overlooked another source of income, which is Point. In fact, this is the core purpose for YT holders to purchase YT and the source of excess returns.

How to quantify the expected yield of Point


On the Point Market page of Pendle, we can see that holding YT can earn some project point rewards. For example, with sUSDe YT, holding 1 YT can yield 30 Sats points rewards issued by Ethena daily. How to effectively quantify the expected returns of Point will determine the profitability of this strategy.

If you want to understand how to correctly calculate the potential point yield, it is important to clarify the point distribution mechanism of each project. Taking Ethena as an example, so far, Ethena has conducted 3 rounds of point activities and has opened the fourth season of point incentives on March 25, 2025, continuing for 6 months, with total ENA rewards distributed not less than 3.5%. In Ethena, different sats point incentive speeds have been designed for many USDe usage scenarios, and the specific mechanism will distribute points daily based on the fiat-denominated amount of the participation scenario, using different "multipliers."

Therefore, to calculate the potential yield of earning points by investing in YT, we need to consider the following key parameters: the current daily total number of points generated, the points already distributed, the expected airdrop ratio at the end of the season, and the price of ENA at distribution. Let's try to calculate it:

1. First, we can use Ethena's official API to obtain the total number of points distributed in the current season, https://app.ethena.fi/api/airdrop/stats. So far, a total of 10.1159 T Sats points have been distributed over a period of 2 months.

2. Next, we can record the changes in the total amount of points every 24 hours and estimate how many points might be generated in the remaining time if the same point release rate is maintained. Here, we assume that the current point release rate remains unchanged, which means an average of 168.6 B points are added daily.

3. Based on your position, calculate the possible total number of points that might be generated in the remaining time. Assuming we hold YT sUSDe assets worth $10,000, it means we can earn approximately 18.6M points daily, calculated as 10000 * 62 * 30.

4. Combining the current ENA price of $0.359, and estimating that the total rewards for the season will be 3.5%. The following calculation is made:

In other words, assuming you buy YT now to participate in the competition for points, under the assumption that all conditions remain unchanged in the future, you will receive an additional 415.8% APY return on the part corresponding to the point airdrop rewards, totaling $13861 ENA rewards. Considering the -22% loss ratio in sUSDe rate dividends, the total APY can reach 393%. Of course, by staking ENA, this yield can be boosted by 20% to 100%. However, we will not elaborate on this here; interested friends can discuss it with me.

How to reduce the risk of yield volatility


Next, let's briefly analyze the risks of this strategy. First, as mentioned above, there are five main parameters that affect the yield: the dividend yield of sUSDe, the price of YT sUSDe, the price of ENA, the total reward proportion expected by the project party in this season, and the daily new points added. We can use the following formula to express the impact of each parameter on the total annualized yield:


So how can we reduce the yield volatility risk of this strategy? We can roughly have three hedging strategies:

1. When the price of ENA is high, shorting ENA in advance can lock in the expected ENA price at the time of reward distribution, avoiding the risk of ENA price fluctuations. Of course, consideration must be given to the margin for shorting ENA and its impact on the capital usage, which in turn affects the yield.

2. In some third-party Point OTC exchanges, such as whales market, when the Point acceptance price is relatively high, cashing in part of the point airdrop value in advance.

3. For the dividend yield of sUSDe, it can only be partially hedged by shorting major assets, such as BTC, ETH, etc., because we know that the funding rate of sUSDe is usually higher during bull markets, as bullish investors are willing to pay a higher funding rate when a bull market comes. However, as market sentiment reverses, the only temporary way is to short major assets to indirectly hedge against the risk of the rate decline. However, Pendle's Boros product functionality allows users to hedge rate risks, so this channel is also worth paying attention to.

Conclusion: This article primarily introduces how to measure the yield and risk of the YT leverage points strategy using sUSDe as an example. For other targets, friends can research based on this methodology, and you are also welcome to discuss with me.