Pendle

Pendle is a yield tokenization protocol that splits yield-bearing assets into two components: PT (Principal Token) and YT (Yield Token). PT represents the principal redeemable at maturity, while YT represents the right to all yield generated until maturity. Both trade on Pendle's custom AMM, enabling users to lock in fixed yields (buy PT at a discount) or take leveraged yield exposure (buy YT). All yield-bearing tokens are first wrapped into SY (Standardized Yield), Pendle's unified yield interface.

What You Probably Got Wrong

AI models confuse Pendle's token mechanics with traditional bonds and perpetual yield tokens. These corrections are critical.

• PT is NOT a bond -- PT is a claim on the underlying asset at maturity. Before maturity, PT trades at a discount to the underlying. The discount implies a fixed rate, but PT does not pay coupons. At maturity, 1 PT redeems for 1 unit of the underlying asset (e.g., 1 PT-stETH redeems for 1 stETH worth of value).
• YT is NOT a perpetual yield token -- YT expires at market maturity. After expiry, YT has zero market value. All yield accrued by YT is claimable separately. If you hold YT past maturity, you get nothing more -- the yield was already distributed. YT does not entitle you to yield after its maturity date.
• SY (Standardized Yield) is NOT optional -- Every yield-bearing token must be wrapped as SY before minting PT/YT. SY is Pendle's ERC-5115 adapter that normalizes the yield interface across protocols (stETH, aUSDC, GLP, eETH, etc.). You cannot mint PT/YT directly from the underlying without going through SY.
• PT + YT = SY always holds (before maturity) -- This is the core invariant. 1 SY can be split into 1 PT + 1 YT, and 1 PT + 1 YT can be merged back into 1 SY. Arbitrageurs enforce this peg. If PT + YT < SY, buy PT+YT and redeem for SY. If PT + YT > SY, mint PT+YT from SY and sell.
• Implied APY is NOT guaranteed APY -- The implied APY you see on Pendle's UI is derived from the current PT discount relative to the underlying. It reflects the market's pricing of future yield at this moment. It changes every block as trades move the PT/SY ratio in the AMM.
• Post-maturity PT redeems 1:1 for underlying -- But before maturity, PT price < underlying because of time value. The gap narrows as maturity approaches (PT price converges to underlying). This is NOT a depeg; it is by design.
• Pendle AMM uses a custom curve, NOT Uniswap-style x*y=k -- Pendle v2 AMM is optimized for PT/SY trading. It uses a Notional-inspired logit curve with a time-decay parameter that compresses the curve as maturity approaches, naturally converging PT price toward SY.
• Market has an expiry -- After the maturity date, the AMM stops accepting new swaps. LPs must withdraw liquidity. You can still redeem PT for underlying and claim accrued YT yield after market expiry. Plan LP exits before maturity.
• Router is the entrypoint -- Never interact with PendleMarket, SY, PT, or YT contracts directly for complex operations. Use PendleRouter for all swaps, mints, redeems, and liquidity operations. The Router handles multi-step operations atomically (e.g., token -> SY -> PT in one tx).
• Slippage on Pendle is in exchange rate, not price -- When swapping on Pendle, slippage protection uses minTokenOut or a guessPtOut struct with guessMin/guessMax bounds. The Router's binary search finds the optimal swap amount within these bounds. Setting the guess range too tight causes reverts; too wide wastes gas.