Aave Borrow Rates Soar, Threatening USDe Yield Loops

Rising borrowing costs on Aave V3 markets may flip Ethena's USDe yield loops into negative carry, according to LlamaRisk's proposal. The company recommends increasing the base variable borrow rate for USDe from 5% to 6% across five markets: Core, Plasma, Monad, Mantle, and Avalanche.

The proposed changes would also reduce Slope1 by one percentage point on every deployment. At current utilization levels, modeled borrower APRs would rise by 13 to 89 basis points, affecting around $323.8 million of USDe debt against $1.18 billion supplied.

LlamaRisk framed the changes as recommendations and plans to implement them through the Risk Steward process.