What is Pendle Finance? PT, YT and fixed yield explained

Pendle splits a yield-bearing token into a principal token that pays a fixed rate to maturity and a yield token that carries the variable return, and vault share tokens have become some of its most active markets.

Pendle Finance is a DeFi protocol that turns the future yield of a token into something that can be bought and sold. It wraps a yield-bearing asset, such as a staked stablecoin or a vault share, and splits it into a principal token (PT), which redeems for the underlying at a set maturity date, and a yield token (YT), which collects all the yield the asset earns until then. Buying PT at a discount locks in a fixed rate, while buying YT is a bet that the variable rate will run higher than the market expects. Pendle held about $1.27 billion in deposits on 27 September 2026, according to DefiLlama, spread across more than a dozen chains.

The result is a fixed-income market built on onchain yield. A holder who wants certainty sells their variable return to a holder who wants more exposure to it, and the price they agree on becomes the market's implied rate. Every market has an expiry, and the whole structure resolves on that date: PT converts to the underlying, YT stops earning and goes to zero, and anyone who wants to keep the position rolls into a later maturity.

Pendle key terms

How Pendle works: SY, PT and YT

Every Pendle market starts with a yield-bearing token. Pendle first wraps it into SY, a standard format described in Pendle's SY documentation, so the rest of the protocol can treat very different assets the same way. One unit of SY can then be split into one PT and one YT. Recombining the pair before maturity returns the SY, which keeps the two halves anchored to the asset they came from.

Pendle's own Pendle Academy compares the split to a bond. PT behaves like a zero-coupon bond, bought at a discount and redeemed at face value, and YT behaves like the detached coupons. The dollar value of one PT plus one YT should always equal one unit of the underlying, so if the market expects a higher yield, YT gets more expensive and PT gets cheaper, and the reverse holds when expectations fall.

A rented flat works the same way. One buyer pays today for the flat's rent until a set date, and a second pays less than full value for the flat itself, handed over on that date. The second buyer's discount is its return, as with PT, and the rent buyer profits only if the rent collected exceeds its price, as with YT.

Naming follows the asset and its accounting unit. PT-sUSDS (USDS) redeems for sUSDS valued at 1 USDS at maturity, and YT-sUSDS (USDS) collects the savings rate earned by sUSDS valued at 1 USDS until then. Each pair carries its maturity date in the symbol, as in PT-sUSDS-26NOV2026.

Fixed vs variable yield on Pendle, with a live example

On 27 September 2026, Pendle's Ethereum market for sUSDS, Sky's savings stablecoin, expiring on 26 November 2026 held about $98.9 million, according to the Pendle markets API. The underlying sUSDS was earning 3.60%, and PT-sUSDS traded about 0.76% below face value with 59 days left, which the market reported as an implied APY of 4.83%.

The PT buyer knows the outcome on day one. They pay about $9,924 of USDS for each $10,000 of face value, and on 26 November each PT redeems for sUSDS valued at 1 USDS, whatever the savings rate does in between. That certainty cost them the chance of a higher variable rate, and in this market they were paid 1.2 percentage points above the trailing sUSDS yield to give it up.

The YT buyer took the other side with far more exposure per dollar. Because each YT costs less than a cent, $10,000 buys the yield on more than $1.3 million of sUSDS, so small moves in the savings rate swing the result sharply. If sUSDS kept paying 3.60%, the position would return less than it cost, and the buyer would need the rate to average close to 4.9% to break even after Pendle's fee. Pendle prices move every block, so a later buyer faces different figures.

How implied APY is set

Implied APY comes straight from the PT price and the time left. A PT that trades at 0.9924 and redeems at 1.00 in 59 days returns 0.77%, which compounds to about 4.8% a year. When buyers pile into PT for a fixed rate, the PT price rises and the implied rate falls, and when traders buy YT (which, inside the AMM, means selling PT), the implied rate rises. The gap between implied APY and underlying APY is the market's forecast of where the variable rate is heading, plus whatever premium traders pay for incentives and points that flow to YT.

The Pendle AMM and what happens at maturity

PT and YT both trade through a single pool per market that pairs PT with SY. Pendle's market contract documentation describes a time-aware design based on Notional Finance's AMM model, which shifts its curve as expiry approaches so the PT price is pushed toward its redemption value. That's why liquidity providers in these pools face little impermanent loss if they hold to maturity, since PT and SY converge by design. YT trades route through the same pool: to buy YT, the contract mints a PT and YT pair from SY, sells the PT into the pool, and hands the YT to the buyer.

On the maturity date the market settles. PT redeems for the underlying with no protocol fee, only network gas, while YT has collected all the yield it will ever earn and has no further value. Positions that aren't redeemed keep sitting in the SY contract, though under Pendle's fee rules the yield and points on matured, unredeemed PT and LP positions go to the Pendle treasury, which pushes holders to redeem or roll forward. Most markets run for about 1 to 6 months, and new maturities are listed as older ones close.

How Pendle makes money

Pendle has two revenue sources. It takes 5% of all yield earned by YT, including points, and it charges a swap fee on PT trades that scales with the time left to maturity. LPs keep 20% of swap fees, and the rest of the swap fees and all YT fees are split 80% to PENDLE buybacks, 10% to the treasury and 10% to operations, according to the same fee documentation.

The PENDLE token: from vePENDLE to sPENDLE

For most of its life Pendle ran a vote-escrow model, vePENDLE, in which holders locked PENDLE for up to two years in exchange for voting power, a share of fees and the right to direct incentives to pools. Pendle replaced it with sPENDLE, a liquid staking token, when staking went live on 20 January 2026, as The Block reported. New vePENDLE locks stopped on 29 January 2026, and existing lockers received a temporary, non-transferable sPENDLE balance that decays as their old lock runs down.

Under the sPENDLE documentation, PENDLE stakes 1:1 into sPENDLE, and unstaking takes 14 days or happens immediately for a 5% fee. 80% of Pendle V2 yield and swap fees fund PENDLE buybacks, and up to all of the repurchased PENDLE is distributed every two weeks to active sPENDLE holders, meaning those who vote when a Pendle protocol proposal is open.

Boros: Pendle's funding-rate market

Pendle also runs Boros, a separate platform launched on Arbitrum on 5 August 2025 that applies the same fixed-versus-floating idea to perpetual futures funding rates. Its unit of trade is the yield unit (YU), and each YU in a market such as BTCUSDT on Hyperliquid represents the funding rate earned by 1 BTC on that venue, according to the Boros documentation. Traders go long YU to receive the floating funding rate against a fixed payment, or short it to lock a fixed rate.

The main use is hedging. A basis trader who collects funding by holding spot and shorting perps can short YU to turn a floating income into a fixed one until maturity, the same trade a PT buyer makes on a staked stablecoin. Boros runs on margin with an order book, unlike Pendle V2's spot PT and YT, and funding rate arbitrage covers the underlying trade in more detail.

Pendle and vault share tokens

Any token that grows in value as it earns can be wrapped into SY, which includes the share tokens that onchain vaults issue. Vault shares under the ERC-4626 standard fit this model closely, because their price per share rises as the vault's strategy earns. Once a vault has a Pendle market, its depositors can sell their future yield for a fixed rate, and traders who expect the vault to outperform can buy that yield through YT.

earnAUSD, Upshift's stablecoin vault on Monad curated by Gamma Research, was one of the first two markets when Pendle launched on Monad in June 2026. On 27 September 2026 the PT-earnAUSD market maturing on 8 October 2026 held about $10.7 million and priced an implied APY of 10.72%, against a 7.11% underlying yield, according to Pendle's API. The gap points to demand for YT in that market, which has also earned WMON incentives. An onchain read of the earnAUSD share token the same day found Pendle's SY contract holding about 10.3 million of 23.8 million shares, or 43% of supply, while the vault itself held about $25.0 million in assets according to Upshift's backend.

That share count describes where holders have moved their earnAUSD, and it sits inside the vault's own total. A depositor mints earnAUSD shares in the vault and then deposits them into Pendle, so the vault's assets are unchanged and the Pendle market simply holds shares that already exist. The PT created from those shares can then travel further, since lending markets such as Morpho on Monad accept PT-earnAUSD as collateral. The earnAUSD Looping Vault is a separate Upshift vault that loops earnAUSD itself through Morpho and Curvance, and the base vault is covered in earning stablecoin yield on Monad with earnAUSD.

For a vault, a Pendle market adds a fixed-rate version of its product without any change to the vault contract. The same vault can serve a depositor who wants the variable rate, a treasury that wants a known return to a set date, and a trader who wants amplified exposure to the strategy. That range of uses is part of why a vault's share token matters as much as its yield, and Upshift builds vaults with that composability in mind across more than 30 chains.

Pendle risks

Pendle restructures yield that comes from somewhere else, so every position carries the risks of the underlying asset as well as Pendle's own. A fixed rate on PT is fixed in units of the accounting asset, which means a depeg or loss in the underlying passes straight through to the PT holder.

• Underlying asset risk: if the wrapped token depegs, is exploited or loses value, PT and YT both reflect it. Pendle's security page lists its audits and notes that it interacts with third-party contracts it doesn't control.
• Smart contract risk: Pendle's contracts have been audited, and audits reduce this risk without removing it. In September 2024 Penpie, a separate protocol built on Pendle, lost about $27 million to an exploit, and Pendle paused its contracts while it assessed the impact.
• Price risk before maturity: PT's redemption value is fixed while its market price moves with rates, so a holder who sells early can realise a loss if implied rates have risen since they bought.
• YT decay: YT loses value every day toward zero at expiry, and it only pays off if the yield it collects exceeds what was paid for it. A YT position can lose most of its cost with no exploit at all.
• Liquidity risk: smaller markets can have thin pools, so large trades move the price, and exiting before maturity may cost more than expected.
• Borrowing on top: looping PT as collateral in a lending market adds liquidation and borrow-rate risk to everything above.

Always make sure to do your own research and be aware of the above and any other risks before depositing.

Frequently asked questions

What is Pendle Finance used for?

Pendle is used to earn a fixed yield by buying PT, to speculate on or hedge variable yield with YT, and to earn fees and incentives by providing liquidity. It works with staked stablecoins, liquid staking tokens and vault share tokens.

What is the difference between PT and YT on Pendle?

PT is the principal: it trades at a discount and redeems for 1 unit of the underlying at maturity, which gives a fixed rate. YT is the yield: it collects the variable return on 1 unit of the underlying until maturity and has no value afterwards.

Is Pendle's fixed yield guaranteed?

The rate is fixed in units of the underlying if PT is held to maturity, so the number of tokens received is known in advance. The value of those tokens still depends on the underlying asset, and selling before maturity happens at the market price.

What happens to PT and YT at maturity?

PT can be redeemed for the underlying with no protocol fee. YT stops earning and has no remaining value, and yield on PT left unredeemed after maturity goes to the Pendle treasury.

Is Pendle safe?

Pendle is audited and has run since 2021, and it still carries smart contract, underlying asset, liquidity and pricing risk. The risk of any position depends heavily on the asset in the market.

What replaced vePENDLE?

sPENDLE replaced vePENDLE in January 2026. It stakes 1:1 with PENDLE, can be withdrawn after 14 days or instantly for a 5% fee, and receives PENDLE bought back with protocol fees.

Can I lose money buying Pendle PT?

A PT held to maturity returns its fixed amount of the underlying, so losses come from the underlying losing value or from selling early at a lower price. YT and looped PT positions carry larger risks.

Keep reading

• What is APY in crypto. How annual yield figures are calculated and compared.
• DeFi yield strategies. Where fixed-rate and looping strategies sit among lending, liquidity and basis trades.
• What is USDe. The synthetic dollar behind several of Pendle's largest stablecoin markets.
• DeFi lending. How the lending markets that accept PT as collateral work.
• Upshift smart contract audits. The 10 audits by 6 independent firms behind Upshift's vault contracts.