Pendle Yield Strategy Overview: Pulse's AgentFi New Paradigm

Written by: 0xjacobzhao

Undoubtedly, Pendle is one of the most successful DeFi protocols in this round of the Crypto cycle. While many protocols have stagnated due to liquidity depletion and narrative decline, Pendle has successfully become the "price discovery venue" for yield-bearing assets with its unique yield splitting and trading mechanism. By deeply integrating with stablecoins, LST/LRT, and other yield assets, it has established its unique positioning as the "DeFi yield infrastructure."

In the research report "The Smart Evolution of DeFi: The Evolution Path from Automation to AgentFi", we systematically sorted and compared the three stages of DeFi's intelligent development: Automation Tools, Intent-Centric Copilot, and AgentFi (On-Chain Intelligent Agents). Besides lending and yield farming, which are the two most valuable and easily implementable scenarios, in our advanced vision of AgentFi, Pendle's PT/YT yield rights trading is regarded as a highly prioritized application that aligns perfectly with AgentFi. Pendle, with its unique structure of "yield splitting + expiration mechanism + yield rights trading", provides a natural strategy orchestration space for intelligent agents, making automated execution and yield optimization richer in possibilities.

1. The basic principles of Pendle

Pendle is the first protocol in the DeFi space focused on yield splitting and trading. Its core innovation lies in tokenizing and separating the future yield streams of on-chain yield-bearing assets (such as LSTs, stablecoin deposit receipts, lending positions, etc.), allowing users to flexibly lock in fixed yields, amplify yield expectations, or engage in speculative arbitrage in the market.

In short, Pendle has built a secondary market for the "yield curve" of crypto assets, allowing DeFi users to trade not only the "principal" but also the "yield." This mechanism is highly similar to zero-coupon bonds + coupon stripping in traditional finance, enhancing the pricing accuracy and trading flexibility of DeFi assets.

Pendle's yield splitting mechanism

Pendle splits a yield-bearing asset (Yield-Bearing Asset, YBA) into two tradable tokens:

PT (Principal Token, similar to zero-coupon bonds): Represents the principal value that can be redeemed at maturity, but does not entitle the holder to any earnings.

YT (Yield Token): Represents all the income generated by the asset before maturity, but will return to zero after maturity.

For example, after depositing 1 ETH stETH, it will be split into PT-stETH (which can be redeemed for 1 ETH at maturity, with the principal locked) and YT-stETH (which receives all staking rewards before maturity).

Pendle is not just a simple token split; it also provides a liquidity market for PT and YT through a specially designed AMM (Automated Market Maker), which is equivalent to a secondary liquidity pool in the bond market (. Users can buy and sell PT or YT at any time to flexibly adjust their exposure to yield risk; among them, the price of PT is usually below 1, reflecting its "discounted principal value," while the price of YT depends on the market's expectations of future yields. More importantly, Pendle's AMM is optimized for assets with expiration dates, allowing different maturities of PT/YT to form a yield curve in the market, which is highly similar to the bond market in traditional finance.

It should be noted that in Pendle's stablecoin assets, PT (Principal Token, fixed income position) is equivalent to an on-chain bond, where a fixed interest rate is locked in through a discount upon purchase, and can be redeemed 1:1 for stablecoins at maturity, providing stable returns with lower risk, suitable for conservative investors seeking certain returns; while the Stablecoin Pool (liquidity mining position) is essentially AMM market making, where LP returns come from transaction fees and incentives, with a highly variable APY, and accompanied by impermanent loss risk, making it more suitable for active investors who can withstand volatility and seek higher returns. In a market with active trading and generous incentives, Pool returns can potentially be significantly higher than PT fixed income; while in a quiet market with insufficient incentives, Pool returns are often lower than PT, and may even incur losses due to impermanent loss.

Pendle's PT/YT trading strategy primarily encompasses four main paths: fixed income, yield speculation, inter-period arbitrage, and leveraged yield. This strategy can meet the investment needs of different risk preferences. Users can lock in fixed income by buying PT and holding it until maturity, which is equivalent to obtaining a certain interest rate; they can also choose to buy YT, betting on rising yields or increased volatility for yield speculation. At the same time, investors can take advantage of price differences between PT/YT of different maturities to engage in inter-period arbitrage, or use PT and YT as collateral to stack lending agreements, thereby amplifying their yield exposure.

Boros' funding rate trading mechanism

In addition to the yield splitting of Pendle V2, the Boros module further capitalizes the Funding Rate, making it not just a passive cost of perpetual contract positions but an independently priced and tradable tool. Through Boros, investors can engage in directional speculation, risk hedging, or arbitrage opportunities. This mechanism essentially introduces traditional interest rate derivatives (IRS, basis trading) into DeFi, providing new tools for institutional-level asset management and robust yield strategies.

In addition to PT/YT trading and AMM pools, as well as the Boros funding rate trading mechanism, Pendle V2 also offers several extended features. Although they are not the focus of this article, they still constitute an important supplement to the protocol ecosystem:

vePENDLE: A governance and incentive model based on the Vote-Escrow mechanism, where users lock PENDLE to obtain vePENDLE, allowing them to participate in governance votes and enhance their yield distribution weight. It is the core of the protocol's long-term incentives and governance.

PendleSwap: A one-stop asset exchange portal that helps users efficiently switch between PT/YT and native assets, enhancing the convenience of capital usage and protocol composability. Essentially, it is a DEX aggregator rather than an independent innovation.

Points Market: Allows users to trade various project points (Points) in the secondary market in advance, providing liquidity for airdrop capture and points arbitrage, leaning more towards speculative and topical scenarios rather than core value.

2. Pendle Strategy Overview: Market Cycles, Risk Layering, and Derivative Expansion

In traditional financial markets, retail investors mainly focus on stock trading and fixed-income financial products, making it typically difficult to directly participate in high-threshold bond derivative trading. In the Crypto market, retail users also find it easier to engage in token trading and DeFi lending. Although Pendle has significantly lowered the entry barriers for retail investors into "bond derivative" trading, Pendle's strategy still requires a high level of expertise, necessitating investors to conduct in-depth analysis of the changes in yield asset rates under different market conditions. Based on this, we believe that in different market phases, such as the early stages of a bull market, the peak of a bull market, a bearish downtrend, and a range-bound period, investors should align their strategies with their risk preferences by matching differentiated Pendle trading strategies.

Bull Market Rising Period: Market risk appetite gradually recovers, lending demand and interest rates remain low, and YT pricing on Pendle is relatively cheap. At this time, buying YT is equivalent to betting on rising future yields. Once the market enters an accelerated upward phase, lending rates and LST yields will increase, thereby raising the value of YT. This is a typical high-risk high-return strategy, suitable for investors willing to position themselves early to capture amplified returns in a bull market.

During the bullish market frenzy, the rising market sentiment drives borrowing demand to soar. The interest rates of DeFi lending protocols often spike from single digits to above 15-30%, which increases the value of YT on Pendle significantly and results in a notable discount on PT. At this time, if investors buy PT with stablecoins, it is equivalent to locking in high interest rates at a discount, and upon maturity, they can redeem the underlying asset at a 1:1 ratio. Essentially, this is a strategy to hedge against volatility risk through "fixed income arbitrage" in the later stages of a bull market. The advantage of this strategy lies in its stability and rationality, ensuring fixed returns and the safety of principal during market corrections or the onset of a bear market. However, the cost is the forfeiture of potentially greater gains from continuing to hold volatile assets.

During a bear market downturn, market sentiment is bleak, borrowing demand plummets, interest rates fall sharply, YT yields approach zero, while PT is closer to the performance of risk-free assets. At this time, buying PT and holding it until maturity means that one can still lock in a certain return in a low interest rate environment, which is akin to establishing a defensive position; for conservative investors, this is the primary strategy to avoid yield fluctuations and preserve capital.

During the interval of oscillation, market interest rates lack a trend, and there are significant differences in market expectations. Pendle's PT and YT often experience short-term mismatches or pricing deviations. Investors can engage in inter-temporal arbitrage between PT/YT of different durations, or capture mispriced rights to earnings caused by fluctuations in market sentiment, thereby obtaining stable spread profits. Such strategies require higher analytical and execution capabilities and are expected to achieve robust returns in a non-trending market.

Global Perspective: Pendle Strategy Market Cycle Comparison Table

Risk Layering: Pendle Decision Tree under Conservative vs Aggressive Strategies

Of course, the above strategies primarily focus on stable returns, with the core logic being to achieve a balance between risk and return through buying PT, buying YT, or participating in stablecoin pool mining under different market cycles. For aggressive investors with a higher risk appetite, more offensive strategies such as selling PT or YT can also be chosen to bet on interest rate trends or speculate on market mismatches. Such operations require higher professional judgment and execution capabilities, and the risk exposure is also greater. Therefore, this article will not elaborate further, and it is for reference only; specific details can be seen in the decision tree below.

Pendle Coin-Based Strategy: Comparison of stETH, uniBTC and Stablecoin Pools

Of course, the analysis of the above Pendle strategies is based on a U-denominated perspective. The focus of the strategy is on how to achieve excess returns by locking in high interest rates or capturing interest rate fluctuations; in addition, Pendle also offers coin-denominated strategies for BTC and ETH.

ETH is widely regarded as the best asset for a currency-backed strategy due to its ecological status and long-term value certainty: as the native asset of the Ethereum network, ETH is not only the settlement basis for most DeFi protocols but also has a stable cash flow source through Staking Yield. In comparison, BTC does not have a native interest rate; its yield on Pendle mainly relies on protocol incentives, making the currency-backed logic relatively weak; while stablecoin pools are more suitable for defensive allocation, serving the role of "preserving value + waiting."

The strategy differences among the three types of asset pools are significant under different market cycles:

Bull Market: The stETH pool is the most aggressive, and YT is the best strategy for leveraged ETH accumulation; uniBTC can serve as a supplement but is more speculative; the attractiveness of the stablecoin pool is relatively declining.

Bear Market: stETH at a low price provides a core opportunity to increase holdings in ETH; stablecoin pools play a major defensive role; uniBTC is only suitable for small-scale short-term arbitrage.

Volatile Market: the PT-YT mismatch of stETH and AMM fees provide arbitrage opportunities; uniBTC is suitable for short-term speculation; stablecoin pools offer a steady supplement.

Boros Strategy Overview: Interest Rate Swaps, Hedging, and Cross-Market Arbitrage

Boros has assetized the floating variable of the funding rate, equivalent to introducing traditional financial interest rate swaps (IRS) and basis trading/carry trade into DeFi, transforming the funding rate from an uncontrollable cost item into a configurable investment tool. Its core certificate Yield Units )YU( supports three main strategy paths: speculation, hedging, and arbitrage.

In terms of speculation, investors can bet on an increase in the funding rate through Long YU (paying a fixed rate Implied APR, receiving a floating rate Underlying APR), or bet on a decrease in the funding rate through Short YU (receiving a fixed rate Implied APR, paying a floating rate Underlying APR), similar to traditional interest rate derivative trading.

In terms of hedging, Boros provides institutions with a tool to convert floating funding rates into fixed rates for those holding large perpetual contract positions.

Hedging Funding Rate Risk )Funding Rate Hedging(: Long Perp + Long YU, locking the floating funding rate expenses as fixed costs.

Locking the received funding rate )Funding Rate Income Hedging(: Short Perp + Short YU → Lock the floating funding rate income as fixed income.

In terms of arbitrage, investors can use the Stable Gain Portfolio )Delta-Neutral Enhanced Yield( or Stable Arbitrage )Arbitrage / Spread Trade( to obtain relatively stable spread returns by leveraging cross-market (Futures Premium vs Implied APR) or inter-period pricing differences.

Overall, Boros is suitable for professional funds for risk management and stable gains, but it has limited friendliness for retail users.

3. Pendle Strategy Complexity and AgentFi's Unique Value

Based on the previous analysis, Pendle's trading strategy is essentially a complex bond derivatives trading. Even the simplest case of buying PT to lock in fixed income requires consideration of multiple factors such as expiration and asset exchange, interest rate fluctuations, opportunity costs, and liquidity depth. Not to mention YT speculation, inter-period arbitrage, leveraged combinations, or dynamic comparisons with external lending markets. Unlike floating income products like lending or Staking, which allow for continuous income with a one-time deposit, Pendle's PT (Principal Token) must have a clearly defined expiration date (usually from several weeks to months). Upon expiration, the principal is redeemed for the underlying asset at a 1:1 ratio, and if one wishes to continue earning income, a new position must be established. This 'periodic' time constraint is a necessary premise of the fixed income market and is also the fundamental difference between Pendle and perpetual lending agreements.

Currently, Pendle does not have a built-in automatic renewal mechanism, while some DeFi strategy vaults offer an "Auto-Rollover" option to balance user experience and protocol simplicity. There are currently three types of Auto-Rollover modes: passive, smart, and hybrid.

Passive Auto-Rollover: The logic is simple, the principal automatically reinvests into new PT after the expiration of PT, providing a smooth user experience. However, it lacks flexibility; once the floating rates of Aave and Morpho are higher, forced renewal will incur opportunity costs.

Smart Auto-Rollover: Dynamically compares Pendle's fixed interest rates with the floating interest rates of the lending market through Vault, avoiding "blind rollovers" and maintaining flexibility while enhancing returns, better aligning with the demand for maximized earnings.

If Pendle fixed interest rate > lending floating interest rate → continue to invest in PT, locking in a higher certainty fixed income;

If the floating lending rate > Pendle fixed rate → Transfer to lending protocols like Aave/Morpho to obtain a higher floating rate.

Mixed Configuration: Part of the funds is locked in PT fixed interest rates, while part flows into the lending market, forming a combination that balances stability and flexibility, avoiding being "thrown off" by a single interest rate environment in extreme situations.

Therefore, AgentFi has unique value in Pendle's trading strategy: it can automate complex interest rate games. Pendle's fixed interest rates for PT fluctuate in real-time with the floating rates of the lending market, making it difficult for individuals to continuously monitor and switch; ordinary Auto-Rollover is merely a passive renewal, while AgentFi can dynamically compare interest rate levels, automatically adjust positions, and optimize position allocation based on user risk preferences. In the more complex Boros strategy, AgentFi can also undertake operations such as funding rate hedging, cross-market arbitrage, and term arbitrage, further unleashing the potential for specialized yield management.

4. Pulse: The first AgentFi product based on the Pendle PT strategy.

In the previous AgentFi series report "The New Paradigm of Stablecoin Yield: From AgentFi to XenoFi", we introduced the stablecoin yield optimization agent ARMA launched based on the Giza infrastructure layer. This product is deployed on the Base chain and can automatically switch between lending protocols such as AAVE, Morpho, Compound, and Moonwell, maximizing cross-protocol yields and consistently maintaining its position in the top tier of AgentFi.

In September 2025, the Giza team officially launched Pulse Optimizer - the industry's first AgentFi automated optimization system based on the Pendle PT fixed income market. Unlike ARMA, which focuses on stablecoin lending, Pulse specializes in the Pendle fixed income scenario: it utilizes deterministic algorithms (not LLM) to monitor the multi-chain PT market in real-time, dynamically allocating positions using linear programming while considering cross-chain costs, maturity management, and liquidity constraints, and automatically completing rollover, cross-chain scheduling, and compounding. Its goal is to maximize the portfolio APY under controllable risk conditions, abstracting the complex "search/APY/rebalance/cross-chain/timing" process into a one-click fixed income experience.

Pulse core architecture components

Data Collection: Real-time capture of Pendle multichain market data, including active markets, APY, expiration time, liquidity, and cross-chain bridge fees, while modeling slippage and price impact to provide precise inputs for the optimization engine.

Wallet Manager: As the hub of assets and logic, it generates portfolio snapshots, manages cross-chain asset standardization, and implements risk control (such as minimum APY improvement thresholds and historical value comparisons).

Optimization Engine: Based on linear programming modeling, it comprehensively considers capital allocation, cross-chain sources, bridge fee curves, slippage, and market expiry to output the optimal configuration scheme under risk constraints.

Execution Planning: Transforming optimization results into a sequence of trades, including liquidating inefficient positions, planning bridge and Swap paths, reconstructing new positions, and triggering a full exit mechanism when necessary, forming a complete loop.

5. Pulse Core Functions and Product Progress

Pulse is currently focused on optimizing ETH-based yield, automating the management of ETH and its liquid staking derivatives (wstETH, weETH, rsETH, uniETH, etc.), and dynamically allocating them across multiple Pendle PT markets. The system uses ETH as the base asset and automatically completes cross-chain token conversions to achieve optimal allocation. It is currently live on the Arbitrum mainnet and will be expanded to the Ethereum mainnet, Base, Mantle, Sonic, etc., and will achieve multi-chain interoperability through the StarGate bridge.

Pulse User Experience Full Process

Agent Activation and Fund Management: Users can activate Pulse Agent with one click on the official website. The process includes connecting a wallet, network authentication, whitelist verification, and depositing a minimum of 0.13 ETH (approximately $500). After activation is complete, the funds are automatically deployed to the optimal PT market and enter a continuous optimization cycle. Users can add funds at any time, and the system will automatically rebalance and redistribute. Subsequent deposits have no minimum threshold, and larger funds can enhance portfolio diversification and optimization effects.

Data Dashboard and Performance Monitoring

Pulse provides a visual data dashboard to track and evaluate investment performance in real time:

Key indicators: total asset balance, cumulative investment, principal and yield growth rate, distribution of positions for different PT tokens and cross-chain positions.

Revenue and Risk Analysis: Supports trend tracking over daily / weekly / monthly / yearly dimensions, combined with real-time monitoring of APR, annual forecasts, and market comparisons, to help measure the excess returns brought by automated optimization.

Multi-dimensional breakdown: displayed according to PT Token (such as PT-rETH, PT-weETH), Underlying Token (LST/LRT protocol), and cross-chain distribution.

Execution Transparency: Fully retain operation logs, including adjustment time, operation type, fund scale, impact on earnings, and on-chain hash, ensuring verifiability.

Optimization Effect: Indicate rebalancing frequency, improvement in APR, degree of diversification, and market response speed, and compare with static positions or market benchmarks to assess risk-adjusted real returns.

Exit and Asset Withdrawal: Users can close the Agent at any time, and Pulse will automatically liquidate PT tokens and exchange them back to ETH, charging a 10% success fee only on the profit portion, while the principal amount will be fully refunded. Before exiting, the system will transparently display the details of earnings and fees, and withdrawals are typically completed within a few minutes. After exiting, users can reactivate at any time, and the historical earnings record will be fully retained.

6. Swarm Finance: Active Liquidity Incentive Layer

In September 2025, Giza officially launched Swarm Finance - an incentive distribution layer designed specifically for Active Capital. Its core mission is to directly connect protocol incentives to the agent network through standardized APR feeds (sAPR), thereby enabling capital to truly achieve "intelligence."

For users: Funds can achieve real-time, automated optimal allocation across multiple chains and protocols without the need for manual monitoring or reinvestment, allowing them to capture the highest yield opportunities.

For the protocol: Swarm Finance addresses the pain points of expiration redemption and TVL loss seen in projects like Pendle, providing more stable and sticky liquidity, while significantly reducing the governance costs of liquidity management.

For the ecosystem: Capital completes cross-chain and cross-protocol migration in a shorter time, enhancing market efficiency, price discovery capability, and capital utilization.

For Giza itself: all incentivized traffic routed through Swarm Finance will partially flow back to $GIZA, initiating the Tokenomics flywheel through the fee capture → buyback mechanism.

According to Giza's official data, Pulse achieved approximately 13% APR when launching the ETH PT market on Arbitrum. More importantly, Pulse addressed the TVL loss issue caused by Pendle's maturity redemption through an automatic rollover mechanism, establishing a more robust capital accumulation and growth curve for Pendle. As the first practical implementation of the Swarm Finance incentive network, Pulse not only demonstrates the potential for smart agent capabilities but also marks the official onset of a new paradigm for active liquidity (Active Capital) in DeFi.

7. Summary and Outlook

As the industry's first AgentFi product based on the Pendle PT strategy, Pulse launched by the Giza team is undoubtedly of milestone significance. It abstracts the complex PT fixed income trading process into a one-click smart agent experience for the first time, achieving full automation in cross-chain configuration, maturity management, and automatic compounding, significantly lowering the operational threshold for users while enhancing the capital utilization efficiency and liquidity of the Pendle market.

Pulse is currently still primarily focused on the ETH PT strategy. Looking ahead, with the continuous iteration of products and the addition of more AgentFi teams, we expect to see:

Stablecoin PT Strategy Product - Provides matching solutions for investors with a more conservative risk appetite.

Intelligent Auto-Rollover —— Dynamically compare Pendle fixed rates with the floating rates of the lending market, enhancing returns while maintaining flexibility;

Market cycle-based panoramic strategy coverage - Modularizing Pendle's trading strategies in different stages of bull and bear markets, covering YT, stablecoin pools, and even more advanced plays like shorting and arbitrage.

Boros strategic AgentFi product - achieving smarter Delta-Neutral fixed income and cross-market / term arbitrage than Ethena, promoting further specialization and intelligence in the DeFi fixed income market.

Of course, Pulse also faces risks that any DeFi product faces, including protocol and contract security (potential vulnerabilities in Pendle or cross-chain bridges), execution risks (expiry rollover or cross-chain rebalancing failures), and market risks (interest rate fluctuations, lack of liquidity, incentive decay). Additionally, Pulse's yields depend on the ETH and its LST/LRT markets; if the price of Ethereum drops significantly, even if the amount in ETH increases, there may still be losses when priced in USD.

Overall, the birth of Pulse not only expands the product boundaries of AgentFi but also opens up new imaginative spaces for the automation and scaling of Pendle strategies in different market cycles, representing an important step in the intelligent development of DeFi fixed income.