Aave Borrow Rates Outpace Staking Yields, Rendering Leveraged Yield Loops Unprofitable

Aave's recent governance recommendation has led to a change in the profitability of borrowing USDe to stake sUSDe on the platform. As of September 9, 2026, borrow rates have exceeded staking yields, making leveraged yield loops costly and potentially loss-making.

The shift affects $323.8 million in USDe debt across five Aave markets, with investors now facing a decrease in returns compared to simply holding sUSDe. Borrowing USDe to convert into sUSDe and stake it on Aave is no longer profitable due to the higher borrow rates, which range from 6.02% to 6.39%, surpassing the staking yield of 5.01%. This change discourages further borrowing for leverage.

Investors are advised to closely monitor both borrow rates and staking yields, as these fluctuate and determine the profitability of such strategies. Aave's governance decision has led to a significant impact on the platform's users, with some potentially facing losses due to the increased borrow rates.