LlamaRisk recommended increasing Ethena’s USDe base variable borrow rate from 5% to 6% and cutting Slope1 by one percentage point across five Aave V3 markets on September 9, a move designed to compress yield loop economics on the stablecoin.
The proposal targets Core, Plasma, Monad, Mantle, and Avalanche markets. Because the recommendation adjusts two components of the rate curve simultaneously, the borrowing cost increase varies by market. The higher base rate pushes rates up while the lower Slope1 partially offsets that move depending on each reserve’s utilization level.
Projected borrow APRs would rise as follows: Core from 5.72% to 6.36% (64 basis points), Plasma from 5.79% to 6.53% (74 bps), Monad from 5.57% to 6.38% (81 bps), Mantle from 5.32% to 6.21% (89 bps), and Avalanche from 6.75% to 6.87% (13 bps).
Yield Loop Dynamics
The changes target a borrowing strategy documented in TokenLogic’s staged repricing program, where users recycle USDe into sUSDe to capture the spread between staking yield and Aave’s borrowing cost. By September 10, borrow APRs on all five markets already exceeded sUSDe’s 4.72% supply APY, meaning a simple borrow-and-stake loop would carry negative economics before accounting for incentives, transaction costs, and other frictions.
USDe debt across the five markets totaled $323.8 million as of the snapshot date, with $1.18 billion in USDe supplied. Market utilization varied widely: Core at 32.3%, Plasma at 22.4%, Monad at 17.2%, Mantle at 9.0%, and Avalanche at 69.9%.
Implementation Path
LlamaRisk framed the changes as recommendations to be implemented through the Risk Steward process, a governance mechanism within Aave. The proposal does not specify an exact timeline for approval or activation. If loop-funded supply unwinds, sUSDe yield is projected to fall to 5.3% from its current 4.72%, according to the analysis underpinning the recommendation.
The rate adjustments reflect a calibration strategy: higher borrowing costs make leveraged positions less attractive, while the Slope1 reduction limits the severity of rate increases at lower utilization levels, preserving borrowing access for non-loop users.
