The purpose of this post is to discuss the upcoming proposal to add Aave/Morpho borrow capabilities for assets USCD, USDT, and DAI to the Real Yield USD vault.
The primary motivation behind this proposal is to support the leveraged DSR strategy through sDAI (which was recently supported in RYUSD).
With USDC borrow rates at roughly 3.5% on Aave V3, and sDAI yielding 5%, we believe the leveraged sDAI strategy is appealing from a risk/reward perspective. In particular, it’s easy to move between USDC and DAI due to the Maker PSM + Arrakis liquidity on Uniswap V3.
At the same time, we believe that introducing the ability to enter long/short positions between stablecoins is useful under certain circumstances. For example, during the USDC depeg there was a substantial opportunity to short USDT vs. USDC when it became clear that depositors would be made whole (the market reacted slowly to this news).
In general, we believe Real Yield USD needs new features to remain competitive.
If the proposal is accepted, a Steward update will enable the strategist to add Aave/Morpho Debt Adaptors to Real Yield USD.