Aave proposes USDe borrow rate increase to 6% across five markets

LlamaRisk has proposed increasing the borrowing costs for Ethena's USDe in five Aave V3 markets, impacting the economics for positions that borrow the stablecoin and recycle it into yield-bearing sUSDe. The recommendation from Sept. 9 suggests raising USDe's base variable borrow rate from 5% to 6% on Core, Plasma, Monad, Mantle, and Avalanche, while also reducing Slope1 by one percentage point on each deployment. At the proposed utilization levels, modeled borrower APRs would increase by 13 to 89 basis points across markets holding approximately 323.8 million USDe debt against 1.18 billion supplied. The proposed changes are not uniform, as the higher base rate raises borrowing costs, while the lower Slope1 partially offsets this increase. Avalanche, with the highest utilization, sees the smallest increase of 13 basis points, while Mantle, with the lowest utilization, experiences nearly the full base-rate rise. The changes aim to target leveraged sUSDe positions, with the potential to lift yields for remaining sUSDe holders toward 5.3% as loop-funded supply unwinds. As of Sept. 10, Aavescan's sUSDe snapshot indicated a 4.72% supply APY, with USDe borrow APRs exceeding this level in several markets, creating a negative carry situation before accounting for incentives and transaction costs.

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