Risk Assessment: Evaluating buying Principal Tokens

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Asset class: Principal Tokens (PTs)
Platforms: Pendle (preferred), Spectra (optional)
Underlying assets: USDe, sUSDe (to start). Optionally adding other high-quality protocols with strong liquidity.

What is PT Buying?

Pendle splits yield-bearing assets into two components: Principal Tokens (PTs) and Yield Tokens (YTs). PTs represent the right to redeem the underlying asset 1:1 at maturity. By buying PTs at a discount, investors effectively lock in a fixed yield. The APY of a PT reflects the market’s expectations for future yields and gradually converges towards a price of 1, meaning that one PT can be redeemed for exactly one of the underlying tokens at maturity.

For Noon, PT buying is attractive because it combines high fixed yield with deep liquidity. Our strategy focuses only on PTs backed by highly liquid, trustworthy protocols and sufficient secondary market depth.

Read our full PT Primer for a detailed walkthrough of how Pendle works, the mechanics of PT pricing, risks, and more.

Noon Risk Assessment: Summary

Our analysts’ recommendation

We’ve completed our initial analysis and now invite community input on whether Noon should add PT buying to its permitted deployment strategies.

Recommendation: Proceed conditionally — with strict liquidity and underlying protocol requirements. Why?

• Stability-first fit: PTs allow Noon to lock in predictable yields that outperform T-bills, aligning with our mandate for low principal volatility.

• Risk controls: We will enforce:

  • Maturity selection: Favour longer-dated PTs to reduce rollover costs and improve predictability.

  • Position caps: Limit per-pool exposure to avoid slippage and liquidity concentration risk.

  • Hurdle rate: Only deploy into PTs where implied yield meaningfully exceeds the T-bill rate.

  • Monitoring: Automated alerts for PT price deviations, liquidity changes, and protocol-level risks.

Together, these conditions support attractive, fixed yield with controlled downside.

Internal PT Exposure

Noon also operates its own Pendle and Spectra pools for USN and sUSN, where external participants can trade yield. However, Noon itself will never buy PTs from its own pools. Doing so would effectively amount to “self-dealing”: minting USN with collateral, using that USN to purchase PT-USN, and eventually redeeming back into USN. This circular loop eliminates the original collateral and leaves Noon with unbacked USN, relying entirely on secondary markets to restore the collateral. To preserve the integrity of our collateralization, Noon’s PT strategy will only involve external protocols and assets — never own pools.

Let’s Open the Discussion, Noon Community:

We propose adding PT buying to Noon’s basket of permitted deployment strategies, subject to the constraints above. We invite discussion in this thread for the next 2 weeks. After that, we’ll open an official vote for all $sNOON holders to include or exclude PT buying from our permitted strategies.

You don’t need to answer every angle — just share what feels most important to you. For example:

• Do you support adding PT buying under these conditions?

• Any concerns we should keep in mind (e.g., liquidity depth, maturity choice, underlying asset risk)?

• Anything we might be missing?

Drop your comments below

[absoluteunit]

This is some good analysis, and I agree that fixed yield exposure has real appeal. That said, I’d like to suggest that Noon also consider prioritizing Spectra’s upcoming Metavaults as a potentially more scalable and practical way to gain similar exposure.

A few reasons why:

• Liquidity scalability: Metavaults are built as async ERC-4626 tokens, meaning they’ll have near day-1 support on major lending platforms. This makes it straightforward for Noon to not just seed liquidity but also loop it on lending platforms, amplifying scale in a way that’s harder to achieve with direct PT purchases. By contrast, if Noon is buying PTs directly, it’s effectively removing PT supply from circulation. That may limit availability for end users who actually want to purchase PTs as part of their own strategies, whereas providing liquidity through Metavaults ensures deeper markets for others to trade against.

• Flexibility on exit: Unlike PTs, which can at times face shallow liquidity or high slippage on large trades, Metavaults can always be redeemed back to the underlying. This provides Noon with more predictable exit options and avoids reliance on potentially markets.

• Strategic partnership upside: Pendle is already heavily focused on Ethena PTs. Spectra, on the other hand, is actively looking for partners to scale with and would likely be highly supportive of Noon stepping in as an anchor asset issuer. This alignment could give Noon a stronger position in shaping product direction and growing alongside the protocol.

To be clear, I’m not arguing against PTs entirely as they have their place. But if Noon’s mandate is to balance stable yield with scalability and controlled risk, Metavaults may offer a cleaner fit for deployment. They still enable other market participants to buy PTs, but Noon itself benefits from better liquidity mechanics, stronger integrations, and a more collaborative protocol partner.

Curious what others think, especially on whether Noon should pursue PT buying directly, or if a Metavault-first approach might deliver similar yield exposure with fewer frictions.

[arpan]

Totally agree - these are certainly not meant to be mutually exclusive. We can certainly consider Spectra Metavaults in the future.

[Deus]

Interesting strategy. The hurdle rate vs T-bills is a smart filter, but curious how Noon plans to monitor protocol-level risks in real time

[Sasha]

This looks like a solid move

[pierrot498]

Good to arbitrage based on underlying project trust