Silo’s PT Lending Market and the Leverage Opportunity

During the recent Sonic yield farming frenzy, Silo launched a PT-wstkscUSD-29MAY2025 vs. USDC.e lending market, allowing traders to unlock leveraged fixed yields on stablecoins.

For those prioritizing predictable returns over speculative points/gems farming, this strategy presents a lucrative opportunity.

Here’s how it works:

Users can deposit PT assets (fixed-yielding) at approximately 12% APY.
They can borrow USDC.e at a variable rate to increase leverage on the trade.
The profit stems from the spread between the fixed PT yield and the variable USDC.e rate, which is currently subsidized by both Silo and Sonic points.
If the realized variable borrowing rate at PT maturity is lower than the fixed yield at which the PT was purchased, the trader secures this spread as profit.

This also functions as a leveraged short yield trade—if the variable rate matches the fixed rate, the return is zero unless the PT fixed rate drops, causing the collateral to appreciate relative to the debt, leading to trader profit.

Currently, wstkscUSD’s yield is artificially high due to Sonic and Ring point incentives, making it an attractive negative carry trade for those betting on lower future yields.

Silo Arbitrage and the Market Response

At launch, the Silo trade was quickly arbitraged:

PT assets were initially selling at ~15% fixed yield.
Leverage was rapidly introduced, pulling the Silo USDC.e borrowing rate to ~10%.
This, in turn, compressed the PT yield down to similar levels.

The best entry was early on, when PT yields were higher, allowing traders to lock in profits as borrowing costs rose gradually.

Euler Vault Emerges: A More Capital-Efficient Alternative

A few days later, MEV Capital introduced an Euler lending vault with a similar PT strategy:

Depositing PT fixed-yielding collateral
Borrowing USDC.e at a variable rate

However, Euler’s Interest Rate Model (IRM) proved far superior to Silo’s:

Despite the larger supply of USDC.e being borrowable against multiple markets, Euler’s IRM offers better funding for the short-yield trade.
Comparison at 50% utilization:
- Silo USDC.e borrow rate: 11.74% APY
- Euler USDC.e borrow rate: 5.44% APY

This significant cost difference is especially crucial for highly leveraged traders, making Euler a far more attractive funding environment.

However, early traders who locked into Silo when it was the only leveraged PT vault needed a seamless way to migrate their positions to Euler.

The Migration Plan: Seamlessly Shifting from Silo to Euler

Rather than manually unwinding the position—an inefficient and capital-intensive process—a secure, capital-efficient migration solution was developed.

With deep knowledge of both codebases, we quickly built and deployed a bespoke contract to execute the transfer within hours of the Euler MEV vault’s activation.

Migration Steps:

Authorize the contract to claim the Silo collateral assets.
Enable contract permissions as an operator on the Euler Vault Connector (EVC).
Take a flash loan in USDC.e for the total Silo debt balance.
Use the flash loan to repay the Silo vault debt.
Withdraw the full PT collateral, as no debt remains.
Enable PT collateral in Euler and set USDC.e borrowing vault as a controller.
Deposit PT collateral into the Euler vault.
Borrow USDC.e from the Euler vault against the deposited PT collateral.
Repay the flash loan in full.
Revoke contract permissions over the user’s account.
Reset Silo collateral approval to prevent future risks.

All of this executed from forge script and hardware wallet with steps 3 through 10 being a single contract call.

Conclusion: Efficient Yield Optimization

This migration strategy enabled seamless position transfer between lending platforms without requiring manual unwinding, additional capital, or unnecessary trading exposure.

By capitalizing on Euler’s superior IRM and lower borrowing rates, traders can significantly improve their leveraged yield strategies while maintaining capital efficiency.

This approach highlights the importance of early entry, market inefficiencies, and technical execution in DeFi yield arbitrage.

Full write up with more technical details to come. Feel free to contact me on X → @yielddev

YieldDev Studio

Stable Yield Maxxing: Shifting an Open Position from Silo to Euler for Optimized Returns