LlamaRisk has proposed raising the cost of borrowing Ethena’s USDe on five Aave V3 markets, a move that could weaken or erase returns from strategies that borrow the stablecoin and redeploy it into yield-bearing sUSDe.
In a recommendation dated Sept. 9, LlamaRisk proposed increasing USDe’s base variable borrow rate from 5% to 6% on Core, Plasma, Monad, Mantle, and Avalanche. The proposal would also reduce Slope1 by one percentage point on each deployment.
At the utilization levels captured in the proposal, modeled borrower APRs would rise by 13 to 89 basis points across markets holding approximately $323.8 million in USDe debt against $1.18 billion in supplied assets.
| Market | Utilization | Current borrow APR | Proposed borrow APR | Increase |
|---|---|---|---|---|
| Core | 32.3% | 5.72% | 6.36% | 64 bps |
| Plasma | 22.4% | 5.79% | 6.53% | 74 bps |
| Monad | 17.2% | 5.57% | 6.38% | 81 bps |
| Mantle | 9.0% | 5.32% | 6.21% | 89 bps |
| Avalanche | 69.9% | 6.75% | 6.87% | 13 bps |
LlamaRisk presented the adjustments as recommendations that would be implemented through Aave’s Risk Steward process.
The overall increase varies by market because the proposal changes two parts of the rate curve simultaneously. A higher base rate pushes borrowing costs upward, while the lower Slope1 offsets part of that increase according to each market’s utilization.
Avalanche, the most heavily utilized market in the snapshot, would see its modeled APR rise by only 13 basis points as the slope adjustment absorbs much of the higher base rate. Mantle, with the lowest utilization at 9%, would face an 89-basis-point increase that captures nearly the full effect of the base-rate hike.
The proposal is aimed at leveraged sUSDe positions. TokenLogic’s phased repricing program described strategies in which borrowers take out USDe, recycle it into sUSDe, and capture the spread between the staking yield and Aave’s borrowing cost.
TokenLogic argued that a higher borrowing floor would discourage such looping. As supply funded by those positions unwinds, the yield available to remaining sUSDe holders could rise toward 5.3%.
As of Sept. 10, Aavescan’s sUSDe snapshot showed a 4.72% supply APY. The borrow APRs displayed for the Core, Plasma, Monad, Mantle, and Avalanche markets all exceeded that rate, leaving a straightforward borrow-and-stake loop in negative carry before incentives, transaction costs, and other frictions.
Because Aave’s variable borrowing rates change with utilization, the proposal’s market-level APRs reflect the modeled impact under Sept. 9 conditions rather than permanent borrowing costs.
