Aave USDG rollover yield trails three borrowing rates

Aave’s proposed USDG rollover would move borrowers from a Pendle position maturing Oct. 29 into a replacement position maturing Feb. 25, 2027. The replacement had an implied annual yield of about 2.98% on Oct. 10.

The comparison involved Pendle principal tokens, or PTs, used as collateral on Aave’s X Layer market. Aave displayed variable borrowing rates of 4.12% for USDT0, 5.87% for USDC and 3.75% for USDG. Borrowing to buy additional February PTs would therefore have produced negative carry before rewards, fees and other costs if the rates had remained unchanged.

GHO was the lower-cost exception in the Oct. 7 comparison, with a 0.93% borrowing rate against a 2.79% PT yield. The figures covered different dates and maturities. Holders of October PTs retain the yield set by their original purchase.

TokenLogic’s proposal would use a flash loan to repay a borrower’s existing debt, replace the October PT collateral with February PTs, borrow again and repay the flash loan. The Aave listing and a separate integration being developed by OKX would need to be implemented before the transaction could take place.

A PT is a discounted claim on an asset that can be redeemed at maturity. For the USDG market, one PT can be redeemed for one USDG. The purchase price determines the holder’s return. PT holders give up the underlying variable yield and related points to Pendle’s yield token, or YT.

At the Oct. 10 rates, the February PT’s expected appreciation through maturity was about 1.11%, based on roughly 137 days. An illustration that held borrowing rates constant and excluded rewards, fees and rate changes produced estimated returns on equity of 0.69% at twice exposure when financed with USDT0, 0.05% with USDC and 0.83% with USDG. At five times exposure, the estimated returns were negative 0.56%, 3.11% and 0.02%, respectively.

The figures are not forecasts. Borrowing rates can change, and the PT’s effective yield depends on its purchase price. The February pool had a 0.05% taker fee, while slippage, network fees and any flash-loan charge could reduce returns.

LlamaRisk attributed some loop users’ returns to external OKX Exchange Earn incentives. A separate OKX Wallet campaign offered bonus annual yields of up to 2% for eligible USDG Loop or PT-USDG-29OCT2026 deposits made through its designated campaign page. The campaign ends Oct. 28 at 07:00 UTC. Its announced 490,000 USDT reward pool is distributed according to eligible participants’ deposit shares.

The Wallet terms apply to the October token and do not establish eligibility for February rewards. They also state that PT positions do not automatically redeem, unwind, renew or roll over at maturity. Users must account for retained YT, promotional rewards and execution costs.

LlamaRisk recommended a new Aave E-Mode 9 configuration with a 91.48% loan-to-value limit, a 93.48% liquidation threshold and a 35 million PT supply cap. The proposed borrowable assets were USDT0, GHO and USDC. USDG was absent, making its borrowing rate a comparison rather than confirmation that it would be available under the February configuration.

LlamaRisk reported 66.03 million October PT units supplied as collateral on Oct. 8. Aave’s X Layer display showed 59.79 million October PT units supplied and $61.12 million in borrowing across the market on Oct. 10. The February pool had about $1.42 million in reported liquidity, limiting the amount that could be migrated without significant slippage.