Yield Farm with Pendle
Pendle takes a yield-bearing asset and splits it into two tradable halves: a Principal Token redeemable one-for-one at maturity, and a Yield Token that collects everything the asset earns until then. Every strategy on Pendle is a bet on which half is mispriced.
That structure is what lets you do something no lending market offers: lock a fixed rate on a variable-yield asset, or take leveraged exposure to a yield stream without borrowing anything. It is also why Pendle positions have an expiry date, which is unusual in DeFi and catches people out.
Since late 2025 Pendle has also run Boros, which extends the same yield-splitting model to off-chain rates — specifically the perpetual futures funding rates that dominate crypto trading. This guide covers the core PT/YT mechanics you need before Boros makes any sense.
What you'll need (prerequisites)
- Self-custodial wallet (MetaMask, Rabby, etc.)
- ETH or native gas token
- Tokens to split into PT/YT with
- Familiarity with transaction approvals
SY, PT, YT and the AMM
A yield-bearing asset is first wrapped into a standardised SY token, then split into PT and YT for a specific maturity date. PT behaves like a zero-coupon bond: it carries no yield and is redeemable one-for-one for the underlying at maturity, so it trades at a discount that narrows as maturity approaches. YT carries all the yield — and all the points, where the underlying protocol issues them — from now until maturity, and decays toward zero as its remaining claim shrinks.
Three positions follow directly. Buying PT at a discount locks a fixed yield: if PT-ETH for a December 2026 maturity trades at 2,700 against a 3,000 spot, holding to maturity realises that gap in ETH terms regardless of what the variable rate does. Buying YT is leveraged long the yield: a small outlay buys the yield stream on a much larger notional, and it goes to zero if the yield does not materialise. Providing liquidity to the PT/SY pool earns swap fees plus PENDLE incentives, with an exposure profile between the two.
The AMM is built for assets that converge, so its liquidity is concentrated around the PT price path — which is why Pendle's slippage on PT trades is far better than a general-purpose DEX would give you at the same depth.
vePENDLE sits on top: locking PENDLE grants governance weight over incentive distribution, boosts LP rewards, and shares protocol revenue. As with any vote-escrow system, the lock is genuinely illiquid for its term.
Recommended for this tutorial
Tools and accounts referenced in the steps below:
Step-by-step
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Step 1: Start from the maturity date, not the APY
Every Pendle market expires. Choose a maturity that matches how long you actually want the position on, because the discount you can capture and the decay you will suffer are both functions of time remaining. A short-dated PT locks less absolute yield; a long-dated YT has more time to accrue and more time to be wrong.
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Step 2: Pick the market and read its depth
Open the official Pendle app, choose the chain and find the market for your underlying asset and maturity. Check the pool's liquidity before sizing: a thin PT market will move against you on entry and again on exit, and the exit matters more because you may want it during stress.
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Step 3: Connect from a bookmark and confirm the network
Type the address yourself. Pendle is deployed across Ethereum, Arbitrum, Base, BNB Chain, Optimism and Mantle among others, and each deployment has separate markets and liquidity. Confirm the chain before approving anything.
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Step 4: Choose your position: PT, YT, or LP
Buy PT if you want a known outcome — a fixed yield to maturity, priced in the underlying. Buy YT if you believe the realised yield (or the points, if you are farming an incentive programme) will exceed what the market has priced in. Provide liquidity if you want fee income and incentives with a blended exposure. Pendle's simpler interface modes hide the SY-splitting step, but the underlying position is one of these three.
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Step 5: Approve the token and set slippage sensibly
Approve the exact amount where the interface allows it. Set slippage as tight as will execute — PT and YT prices move in fast, discrete steps around yield-rate news, and a wide tolerance in a thin market is expensive.
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Step 6: Execute and verify the token you received
Confirm the transaction and check the explorer: PT and YT for the same asset and maturity are different contracts, and buying the wrong one is a completely different trade. Verify the maturity date encoded in the token name matches what you intended.
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Step 7: Manage the position through its life
YT holders accrue yield continuously and must claim it — unclaimed yield is not automatically compounded. LPs accrue swap fees and PENDLE incentives that also require claiming. PT holders have nothing to do until maturity. Set a calendar reminder for the maturity date; this is the step people forget.
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Step 8: Redeem at maturity — or don't, and understand what happens
After maturity, PT redeems one-for-one for the underlying with no protocol fee, only network gas. YT stops accruing and is worthless. If you leave a PT or LP position unredeemed after maturity, the underlying asset stays in the SY contract and continues to accrue yield and points — but Pendle collects the yield from matured, unredeemed PTs, so leaving it there is not free. Redeem promptly.
Pendle's fee structure
YT yield fee: Pendle collects 5% of all yield accrued by every YT in existence, including points, and also collects all yield from the SY of matured but unredeemed PTs. That second clause is the reason to redeem on time rather than leaving a matured position parked.
Swap fees: Pendle charges a percentage-based fee on PT swaps that scales with maturity — less time to maturity means fewer yield-receivables and therefore a lower fee in dollar terms. The tier is chosen by the pool deployer and is displayed in the dApp for each market, so read it there rather than assuming a fixed number.
Redemption: Redeeming PT for the underlying after maturity incurs no protocol fee, only network gas. Add gas for approve, trade, claim and redeem transactions to your total cost, and prefer an L2 deployment for smaller positions.
Security pitfalls
- Everything expires. A forgotten YT decays to zero and a forgotten matured PT has its ongoing yield collected by the protocol. Calendar the maturity.
- YT can lose everything. If realised yield undershoots what you paid for, the position simply does not recover — YT has no terminal value.
- Fixed yield is fixed in the underlying, not in dollars. A PT-ETH position locks an ETH-denominated return; the dollar outcome still depends on ETH's price.
- You inherit the underlying protocol's risk. Pendle wraps assets from other protocols. A depeg or exploit in the underlying flows straight through to your PT and YT.
- Points programmes are not yield. A YT bought for point farming pays in a speculative future allocation with no guaranteed value.
- Thin markets punish exits. Check depth before entering at a size you may need to unwind quickly.
- Verify PT versus YT contract addresses before trading, and revoke stale approvals — see revoking token approvals.
Troubleshooting
- Bought the wrong token. PT and YT for the same asset and maturity are separate contracts with opposite exposures. Check the token name and address; the only remedy is to trade back out.
- YT value falling every day even though yield is accruing. That is by design — YT decays toward zero as remaining time shrinks. Your return is the yield you claim, not the token's price.
- PT is worth less than I paid. Before maturity PT trades at a market-set discount and can move with rates. Held to maturity it redeems one-for-one for the underlying.
- Swap reverted. Slippage too tight for a thin PT pool, or a missing approval. Widen slippage marginally, verify the allowance, retry.
- Rewards not showing in my balance. YT yield, LP fees and PENDLE incentives all require explicit claim transactions; none of them compound automatically.
- Market disappeared from the interface. It matured. Look under matured or expired markets to redeem your PT.
- Position looks fine but the APY collapsed. Implied yield reprices as the market's expectation for the underlying rate changes. For a PT held to maturity this is noise; for a YT it is the whole trade.
FAQ
What are PT and YT?
Splitting a yield-bearing asset produces a Principal Token and a Yield Token for a fixed maturity. PT is like a zero-coupon bond: it pays no yield and redeems one-for-one for the underlying at maturity, so it trades at a discount that narrows over time. YT collects all the yield, and points, until maturity and decays toward zero as its remaining claim shrinks.
What does Pendle charge?
Pendle collects 5% of all yield accrued by every YT, including points, and all yield from the SY of matured but unredeemed PTs. There is also a percentage swap fee on PT swaps that scales with time to maturity, set per pool by the deployer and displayed in the dApp. Redeeming PT after maturity carries no protocol fee — only network gas.
How do I lock a fixed yield?
Buy PT at a discount and hold it to maturity. The gap between the discounted purchase price and the one-for-one redemption is your fixed return, denominated in the underlying asset. It is fixed in underlying terms, not in dollars — a PT-ETH position still leaves you exposed to ETH's price.
What happens if I forget about a position after maturity?
YT stops accruing and has no value. An unredeemed PT or LP position leaves the underlying sitting in the SY contract where it continues to accrue yield and points — but Pendle collects the yield from matured, unredeemed PTs, so the delay costs you. Redeem promptly after maturity.
What is Boros?
Boros is Pendle's extension of the yield-splitting model to off-chain rates, launched in late 2025. Instead of splitting an on-chain yield such as staked ETH rewards, it splits perpetual futures funding-rate cashflows, letting traders lock a fixed funding rate for a defined period or take the other side. It is an advanced product and assumes fluency with the PT/YT mechanics above.