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Yield Arbitrage
One way to maximize returns is by taking advantage of yield discrepancies between different assets.
If Pendle offers a fixed 5% APY on PT-stETH (or 10% yvWETH), while the borrow rate for ETH on lending market is only 3%, users can deposit PT-stETH as collateral, borrow ETH, swap the borrowed ETH for more PT-stETH, and repeat it multiple times, potentially earning a maximum leveraged APY.
💡 This strategy combines the benefits of depositing a yield-bearing asset and borrowing on the lending market, but with the added advantage of the certainty provided by the fixed rate of Pendle’s PT tokens.