Pendle Clears Up Morpho Market Move: 3% Price Drop, Not Oracle Error

Pendle's yield tokenization protocol has clarified that recent liquidations in Morpho's PT-reUSD/$USDC market were not caused by an oracle error. The price drop that triggered the liquidations was a brief 3% fall in the value of PT-reUSD, which represents the right to redeem reUSD at maturity.

Pendle explained that its oracle mechanism uses the lower of the PT's 15-minute average market price and a benchmark price reflecting a 6% annual discount rate through maturity. This design aims to prevent rapid price manipulation and ensure fair valuation.

When the market price fell by 3%, positions with health factors below 1.03 were liquidated, reducing their collateral value. Pendle emphasized that the oracle functioned as designed and that no bad debt emerged during the liquidation process.