# Yield Tranche ### What are Yield Tranche? Yield Tranche represents the right to excess future yield from a large looping position over a specific time period. For Loopers, YT provides a mechanism to hedge yield uncertainty by locking in fixed income upfront. For buyers, YT offers leveraged yield exposure with a capped downside and uncapped upside — at a lower structural cost than comparable Pendle YT positions, because the seller (a Looper) is already more profitable and has more room to offer competitive pricing. **Key Benefits:** * **Leveraged Yield Exposure**: Access yields from much larger positions than your capital alone allows * **Fixed Cost Structure**: Pay predetermined rates regardless of actual performance * **Unlimited Upside**: Capture all variable yields above your fixed payments * **Capped Downside:** Maximum loss is your fixed upfront payment, no liquidation risk * **Pure Speculation:** No collateral management needed—just pay and profit from yield performance ### Bondify YT Liquidity Layer Bondify introduces two dedicated liquidity layers that transform illiquid DeFi positions into tradeable, standardized instruments — [one for leveraged looping positions](https://docs.cian.app/bondify/for-users-quick-start/looping#bondify-jr-liquidity-layer) themselves, and one for the yield rights they generate. #### What is YT? YT (Yield Token) represents the yield rights generated by the collateral underlying a leveraged looping position. When a Looper sells their yield rights, the buyer receives all organic yield (and/or points) generated by the collateral from the time of purchase until maturity. YT can be issued in two forms (under development): * **YT-O (Organic Yield):** Represents the organic staking yield of the underlying collateral (e.g., sUSDe yield) * **YT-P (Points):** Represents the points accrued by the underlying collateral (e.g., Ethena sat-days), tradeable independently of organic yield YT-O and YT-P can be sold together as a **bundle** or **split and listed independently** in separate FIFO queues. #### Supply Sources YT supply comes from multiple sources, all clearing through the same FIFO queue on a time-priority basis. Orders from different sources compete equally — whoever lists first fills first — with one exception: **SLF always acts as the last-resort provider**, only deploying capital when no other seller exists in the queue. Sources that can supply YT: * **Looper-minted YT** — Loopers issuing YT directly from their active looping position * **YT → YT conversion** — holders of previously purchased YT who convert and relist * **YT resale** — secondary YT holders relisting before maturity * **SLF (last resort only)** — protocol deploys its own capital exclusively when the queue is empty; ensures YT is always available to buyers regardless of organic supply *** ### How You Make Money from YT? #### **The Profit Mechanism** * **SLF provides the majority capital:** Supplies most stablecoins needed for the $100M staked position * **You pay fixed upfront cost:** Pay predetermined amount (e.g., $12M for 3 months on $100M position) * **You receive variable yield exposure:** Capture all actual yields from the entire $100M position * **Your profit:** Keep all yields above your breakeven rate (implied APR cost) **Example with $100M Position and 3-Month Term:** **Scenario 1 - Expected Yield (20% APY):** ``` Total RWA Position: $100,000,000 Your Upfront Payment: $12,000,000 SLF Contribution: $88,000,000 Total Yield Generated: $100M × 20% = $20,000,000 Your Share of Yield: $20,000,000 (100% of excess yield) Less: Upfront Cost Paid: -$12,000,000 Net Profit: $8,000,000 ROI: $8M / $12M = 66.7% return ``` **Scenario 2 - Higher Yield (25% APY):** ``` Total Yield Generated: $100M × 25% = $25,000,000 Your Share of Yield: $25,000,000 Less: Upfront Cost Paid: -$12,000,000 Net Profit: $13,000,000 ROI: $13M / $12M = 108.3% return ``` **Why Extreme Leverage Works for YT:** * **Short duration:** 30-180 day positions reduce time-based risks * **Higher effective LTV:** YT strategies achieve \~90%+ effective exposure through upfront payment model * **Amplified returns:** Relatively small upfront capital generates massive yield exposure * **No liquidation risk:** Unlike Loopers, YT positions have capped downside at upfront cost **Maturity Management** YT positions have fixed maturity dates (unlike perpetual Looper positions). At maturity: * System automatically unstakes the full $100M position * Repays SLF capital ($88M) plus any fees * Distributes net profits to YT holders, ie. $20M * Transfers accumulated rewards (points, airdrops, etc.) to YT holders **If yields exceeded breakeven:** You receive substantial profits proportional to the spread **If yields fell short:** You lose part or all of your upfront payment, capped at $12M maximum #### Unified Pricing Formula All YT supply sources use a unified time-decay pricing model: ``` YT_cost = YT_amount × SLF_daily_rate × remaining_seconds ``` This ensures fair, real-time pricing across all listings regardless of source, and allows prices to decay naturally as maturity approaches. **Worked example:** ``` Collateral: 6,876.88 sUSDe Daily rate: 0.0002 Remaining days: 72 Step 1 — YT value denominated in collateral: 6,876.88 × 0.0002 × 72 ≈ 99 sUSDe Step 2 — Convert to USDC (sUSDe oracle price = $1.20): 99 × 1.20 = ~120 USDC ``` *** ### Listing Requirements Before a Looper can list YT, two conditions must both be satisfied: * Position LTV must be **≤ max\_LTV** at the time of listing * Must list **100% of collateral** — partial listings are not permitted Once listed, the collateral is **100% locked**. The Looper can still repay debt to lower LTV, but cannot withdraw or unstake collateral until the listing is cancelled, bought back, or settled at maturity. #### Key Protocol Rule: Tokenization Happens at First Purchase YT is **not** officially minted at the time of listing. It becomes tokenized only when the first buyer executes against the listing. This means: * A listed YT that never gets purchased is treated as if it was never issued * The Looper retains 100% of organic yield generated during the listing period if no buyer ever fills the order * There is no penalty for listing and not selling #### YT Lifecycle Summary
StateDescriptionOutcome for Looper
Listed, unsold at maturityNo buyer found before expiryFull yield retained, no penalty
Voluntarily cancelledListing cancelled before fillFull yield retained, instant unlock, zero fees
Partially filled, held to maturitySome YT sold, remainder unsoldFixed yield received for filled portion; unfilled yield retained
Partially filled, then cancelledRemaining listing cancelled post-partial fillYield for filled period deducted; position unlocked
Secondary resale by YT holderHolder relists before maturityNew buyer acquires remaining yield rights; original holder keeps yield accumulated during their hold
Underlying position liquidatedLTV breaches the Liquidation Price threshold; position transferred to LiquidatorFixed yield already received by the Looper is unaffected. The underlying looping position is dissolved. YT holders generally cease to receive subsequent organic yield (Liquidator may voluntarily share profits). The GYT token itself remains valid until its maturity date even after liquidation.
#### Position Split and Merge on Partial Fill Every partial fill automatically splits the underlying looping position to enable precise yield accounting: ``` Initial: 500 YT listed (single position, 500 sUSDe collateral) Fill 1 (Day 5): 300 YT purchased → Splits into: FILLED (Position A): 300 sUSDe — locked, yield rights transferred to buyer UNFILLED (Position B): 200 sUSDe — remains in FIFO queue Fill 2 (Day 10): 100 more YT purchased → Position B splits; new filled portion merges into Position A: FILLED (Position A): 400 sUSDe — merged UNFILLED (Position B): 100 sUSDe — still in queue ``` From the user's perspective, the interface always shows a clean two-position view: **FILLED** (locked, yield transferred) and **UNFILLED** (in queue, manageable). Subsequent fills automatically consolidate into the FILLED segment. #### Buy Back — How Loopers Exit Early A Looper who has sold YT can exit their commitment before maturity by buying back equivalent YT from the market and returning it to unlock their position. * Must buy back the **full issued amount** — partial buyback is not supported * YT returned to position → status reverts from YT-Issued → Active → Looper can Release **Buyback pricing uses the current market rate, not the original listing rate:** ``` Cost = GYT_amount × current_compound_price Example: Buy back 500 YT at Day 40 (50 days remaining) interestRate = (1.0002155)^51 - 1 = 0.01105 price per YT = 0.01105 / 1.01105 = 0.01093 Total cost ≈ 500 × 0.01093 ≈ 5,465 USDC ``` For Split Sale positions, the buyback routing is: 1. System cancels any unfilled listings in queue (recovering those tokens) 2. Remaining required YT-O and YT-P are purchased from their respective markets 3. Components are recombined into YT and returned to unlock the position *** ### YT-O and YT-P — Yield Decomposition (Upcoming Updats) Different YT supply sources carry different points multipliers — a YT from SLF sUSDe (20× points) is economically different from one migrated from AAVE (5× points). Bundling them into one token creates pricing inefficiency for buyers who only want one component. YT-O/YT-P decomposition solves this by allowing YT to be split into two independently tradeable yield components: * **YT-O (Organic Yield Token):** Rights to the staking APY of the underlying collateral. Cross-source fungible — organic yield depends only on the asset, not where the position was funded * **YT-P (Points Token):** Rights to protocol incentive points (e.g., Ethena sat-days). Cross-source fungible — all GYT-P represent the same unit of points regardless of origin This lets buyers target exactly what they want: pure organic yield, pure points exposure, or both. It also enables more accurate price discovery since the two components respond to different market signals. **Listing modes:** * **Bundle Sale:** YT listed as a unified bundle — buyers receive both organic yield and points together * **Split Sale:** YT is automatically decomposed on listing; YT-O and YT-P enter separate queues, allowing buyers to purchase each component independently Split and merge between YT and its components are reversible at any time with no value loss. This feature is planned for a future release. *** #### Retroactive Rewards If a protocol issues retroactive rewards after YT has already been split into YT-O and YT-P, those rewards are distributed proportionally to YT holders based on original YT ownership — not decomposed further into O/P components. Since their nature (organic or points) is unknown at listing time, they are treated as belonging to the YT layer. #### Structural Advantage vs. Pendle Pendle performs a "horizontal" split — separating principal from yield at the asset level. Both PT and YT holders remain exposed to the same underlying asset risk. Bondify performs a "vertical" split — creating a hierarchical capital structure where the Junior Tranche acts as a protective buffer. This means: * YT holders have a structurally lower-risk yield product * Loopers (the YT sellers) have greater room to price competitively because their leveraged returns are higher to begin with * The result is deeper, more sustainable yield market liquidity *** ### Risk **Considerations** * **Fixed cost risk**: In worst-case scenarios, you lose the predetermined interest payments to SLF * **Yield risk**: Actual RWA yields may be lower than projected, reducing profits * **Limited principal risk**: Unlike traditional lending, RWA price movements don't create additional losses beyond your initial capital and fixed payments * **Maturity lock:** Position is locked until maturity date; no early exit