PT and YT explained
A deep but plain explanation of Principal Tokens and Yield Tokens — what they represent, how they're priced, and why their value always sums to the original position.
When you deposit USDC, Spield mints two tokens in equal amounts: a Principal Token (PT) and a Yield Token (YT). This is the heart of the protocol, so let's make it concrete.
The split
Imagine you deposit 100 USDC. That USDC is supplied to the yield source and starts earning interest. Spield then represents your position as two separate claims:
- PT is your claim on the principal. Each PT redeems for exactly 1 USDC at maturity.
- YT is your claim on the yield. It collects everything the position earns until maturity.
You now hold 100 PT and 100 YT. You can keep both, sell one, or trade them separately.
The invariant
Value(position) = Value(PT) + Value(YT) — always. Splitting never changes the total value; it just hands you two pieces you can manage independently.
PT — the fixed-rate bond
A PT behaves exactly like a zero-coupon bond:
- It's worth 1 USDC at maturity (its "par" value).
- Before maturity it trades at a discount — say 0.97 USDC.
- That discount is your fixed return: buy at 0.97, redeem at 1.00, keep the difference.
As time passes and maturity nears, a PT's market price drifts up toward par (1.0), because it's getting closer to being redeemable for a full 1 USDC.
Your return is fixed the moment you buy. If 1 PT costs 0.97 and matures in 90 days, you earn ~3.1% over 90 days (≈ 12.5% annualized) — no matter what happens to rates afterward.
PT redeems 1:1 for USDC at or after maturity. Before maturity you can't redeem it for par, but you can sell it on the market at its current price, or recombine it with YT to exit early (see below).
YT — the yield token
A YT is a claim on all the yield the position earns until maturity. Because it's cheap relative to the exposure it represents, it's a leveraged way to bet on yield:
- A small amount of USDC buys YT covering the yield of a much larger position.
- If realized yield beats the market's expectation, YT is profitable.
- If realized yield underperforms, YT can decay toward zero by maturity.
You can claim the yield a YT has accrued at any time — it pays out in USDC, and the YT keeps earning until maturity.
YT is the higher-risk leg
YT is for users with a view on yield. Its value can fall to zero at maturity if the position earned little. That's the trade-off for its leverage — read Understanding the risks.
How they relate over time
Here's the intuition for the whole life of a market, holding yield expectations constant:
- PT climbs to par. Its price predictably rises to 1.0.
- YT decays to zero. Its remaining-yield claim shrinks as there's less time left, but it pays out the yield it earned along the way.
This predictable "time decay" is exactly what the yield market is built to price.
Recombining (exit early)
If you hold equal amounts of PT and YT, you can combine them back into USDC at any time — even before maturity — because together they're just the original position again. Spield automatically claims any pending yield first, so nothing is lost. This is your "undo": PT + YT → USDC.
Recap
| PT (Principal Token) | YT (Yield Token) | |
|---|---|---|
| Represents | Your principal | All future yield |
| Redeems for | 1 USDC at maturity | Yield, claimable any time |
| Price over time | Rises toward par (1.0) | Decays toward 0 |
| Risk | Low — a bond | Higher — leveraged on yield |
| Best for | Savers wanting certainty | Traders with a yield view |
Protocol overview
A high-level walkthrough of how Spield works — from depositing USDC to holding tradable fixed and variable yield, all backed by a real on-chain position.
The yield source
Where Spield's yield comes from — your USDC is supplied to Blend, Stellar's lending market, and the backing grows on-chain as real interest accrues.