Unwinding Pendle positions with expired Principal Tokens
Last updated
Last updated
Closing or repaying a Pendle position on DeFi Saver is functionally the same as with other collateral, in terms of the steps you need to take. However, if the Principal Tokens have expired (reached maturity), the steps taken within the close/repay recipe differ.
Expired tokens can't be sold off (swapped), and must first be redeemed on Pendle. Another factor is how the unstaking process for the underlying asset works.
For example, Ethereal's eUSDe can be instantly redeemed for USDe. On the other hand, Ethena's sUSDe requires a 7-day waiting period before it's redeemed for USDe As such, if the unstaking window is instant, our recipe will also unstake the PT's yield-bearing asset and then swap the underlying stablecoin for the debt asset. If the unstaking window is not instant, our recipe will only redeem the PT for the yield-bearing asset, and then swap that for the debt asset. Seeing as this is not a stablecoin asset being swapped for a stablecoin - it can experience more significant slippage and trade size impact one a lot of selling pressure kicks in on maturity.
As such, when executing a Close or Repay for Pendle positions with expired PTs, the recipe will:
Redeem the Principal Token on Pendle.
If the yield-bearing asset is instantly withdrawn on its original protocol, then the underlying asset is swapped for the debt asset (eUSDe unstaked for USDe, and swapped into USDC, for example)
If the yield-bearing asset is not instantly withdrawn from its original protocol, then the yield-bearing asset is swapped for the debt asset (sUSDe is directly swapped into USDC, for example)
The debt si repaid with the debt asset.
This provides users with positions that have expired PTs a time and cost-efficient way of unwinding their position in a single transaction.
Currently, both the Close and Repay features have 0% fees from DeFi Saver.
When performing a rollover for a PT position on DeFi Saver, both the expired PT position, and the position with new PTs will need to have an activated E-Mode.
However, the Max LTV of the new PTs E-Mode is lower than the one for the expired token. As such, users would need to perform a small Repay of their position in order to fit with the new position's Max LTV.