Aave rate tweak could turn sUSDe loops negative

LlamaRisk proposed on Sept. 9 raising Ethena USDe’s base variable borrow rate from 5% to 6% and reducing Slope1 by 100 basis points across five Aave V3 deployments: Core, Plasma, Monad, Mantle and Avalanche. The recommendation was filed for consideration through Aave’s Risk Steward governance process.

The proposal models market conditions captured on Sept. 9 and applies the same base-rate increase and Slope1 reduction to each deployment. Base rate sets the borrowing floor while Slope1 controls how quickly rates rise as utilization increases. The change is presented as a risk-management measure to address leveraged borrowing patterns.

Modeling in the proposal used a snapshot showing about $323.8 million of USDe debt against roughly $1.18 billion supplied. At those utilization levels, borrower APRs would rise by between 13 and 89 basis points across the five markets. Mantle, with 9.0% utilization, would see the largest modeled increase from 5.32% to 6.21% (89 bps). Monad at 17.2% utilization would move from 5.57% to 6.38% (81 bps). Plasma at 22.4% utilization would shift from 5.79% to 6.53% (74 bps). Core at 32.3% utilization would increase from 5.72% to 6.36% (64 bps). Avalanche, the most-utilized market in the snapshot at 69.9%, would see a smaller modeled rise from 6.75% to 6.87% (13 bps) because the lower Slope1 offsets part of the base-rate increase at higher utilization.

The proposal targets positions that borrow USDe and immediately restake it as sUSDe to capture the spread between staking yield and borrowing cost. At the time of the snapshot, sUSDe supply APY was 4.72%. Several market pages in the snapshot showed USDe borrow APRs above that supply APY, which means a simple borrow-and-stake loop would have carried a negative spread before accounting for incentives, gas and other transaction costs.

TokenLogic outlined staged repricing plans and modeled the effect of loop-funded supply unwinding. Its analysis projected that sUSDe yield could rise toward roughly 5.3% if a significant amount of loop-funded supply left the markets. The proposal’s APR figures reflect the Sept. 9 market snapshot; actual borrower costs will change as utilization moves.

Any change to rate parameters would need approval through Aave’s Risk Steward governance channel and would not take effect automatically.