How do U.S. Treasury yields affect stablecoin returns in Gate Finance?

The fluctuations in U.S. Treasury yields are increasingly transmitting directly to the yield products in the crypto market. This transmission is not an indirect mapping but occurs through three pathways: holdings of underlying assets, changes in funding costs, and institutional allocation behaviors. For users focused on stable returns, understanding this transmission mechanism helps clarify the sources and dynamics of on-chain yield products.

The Federal Funds Rate Remains the Benchmark Anchor for On-Chain Yields

As of May 28, 2026, the Federal Reserve's target range for the federal funds rate remains at 3.50% to 3.75%, with the effective rate around 3.63%. This rate level forms the underlying coordinate for global dollar funding costs. On-chain stablecoin lending rates, staking product yields, and various DeFi protocol funding rates all fundamentally revolve around this benchmark.

In the March 2026 FOMC meeting, the decision to keep rates unchanged with an 8-4 vote marked the most divided decision in over three decades. The median of the Fed's dot plot indicates only one rate cut in 2026 (by 25 basis points), with another cut in 2027, and the median forecast for the federal funds rate at the end of 2026 is 3.4%. CPI in April rose 3.8% year-over-year, significantly higher than March's 3.3%, directly boosting market expectations that the Fed will continue its tightening policy. Market expectations for high rates have been fully priced in; as of the close in New York on May 27, the 2-year U.S. Treasury yield was 4.0349%, and the 10-year yield was 4.48%. The high synchronization between short-term Treasury yields and the federal funds rate indicates that all dollar-denominated fixed income products—whether in traditional finance or on-chain—are under the influence of this rate curve.

The yields on stablecoin financial products are not formed in isolation. When short-term U.S. Treasuries offer around 4% risk-free returns, on-chain stablecoin products that cannot offer competitive yields will naturally see funds flowing toward higher-yield options. This arbitrage mechanism ensures a strong correlation between on-chain yields and dollar interest rates.

How U.S. Treasury Yields Affect On-Chain Yield Products

Changes in traditional financial market rates influence on-chain yield products through three pathways.

First: Synchronous changes in the underlying asset yields. Yield-bearing products like GUSD-backed products hold high-liquidity assets such as U.S. Treasuries. When Treasury yields rise, the interest income from these underlying assets increases, supporting the reference annualized yield of the product. Conversely, when Treasury yields fall, the income from underlying assets decreases, putting downward pressure on product yields. This is a direct and immediate transmission path.

Second: Profit transmission from stablecoin issuers. According to Grayscale research, a high-interest-rate environment significantly benefits stablecoin issuers holding large amounts of interest-bearing assets. Zach Pandl, head of research at Grayscale, estimates that for every 25 basis point increase in short-term interest rates, stablecoin issuers' annual revenue could increase by about $190 million. Although regulations prevent issuers from paying interest directly to users, yield products within the ecosystem can indirectly pass some of these benefits back to users via mechanisms like Launchpool and YieldBox, creating an indirect transmission.

Third: Risk pricing migration among institutional funds. As of April 2026, Aave V3's USDC deposit rate was about 2.7%, below the U.S. federal funds rate of 3.5% and the 10-year U.S. Treasury yield of 4.3%. CoinDesk reports that in early May, the annualized borrowing rate for stablecoins on Aave had fallen to 5% or lower, down sharply from the 13-14% during abnormal periods. Tesseract Group's asset management head noted that Aave V3's USDC rate recovered to about 3.86%, Morpho's select vault rates ranged from 3.5% to 5.4%, and Sky USDS savings rate was around 3.65%. This yield spread makes institutional capital prefer on-chain yield products with transparent underlying assets over purely demand-supply driven DeFi protocols. This trend directly fuels the rapid growth of the RWA sector.

Why Stablecoin Yield and USD Interest Rates Are Correlated

As assets pegged to the dollar, stablecoin yields are not coincidental with USD interest rates but are jointly determined by arbitrage mechanisms, asset custody, and competitive pricing.

Arbitrage is the core force. The essence of stablecoin yield products is to allocate user deposits into interest-bearing underlying assets. When USD rates rise, yields on traditional instruments like short-term Treasuries and repos increase, expanding the yield space for stablecoin products. If on-chain products do not reflect this change, users can perform arbitrage through minting, redemption, or cross-platform transfers until the yield differential is eliminated.

Asset custody structures further reinforce this link. Products like Gate's YieldBox, managing over 800 digital assets, must interface with interest-bearing tools from traditional finance, with USD rates setting the central return level. The annualized yields of Gate's USDT products fluctuate with market interest rates and lock-up periods, reflecting this linkage.

Market-driven competitive pricing also plays a role. In a smoothly transmitted rate environment, if on-chain yield products are significantly below traditional USD yields, they lose competitiveness; if they are significantly above, they may incorporate additional risk premiums. This competitive dynamic causes stablecoin yields to fluctuate around USD interest rates over the long term, forming a stable correlation. As Grayscale research points out, USD-denominated fixed income yields are generally higher than similar DeFi products; higher yields on tokenized bonds attract more assets onto the chain.

The Yield Logic of GUSD: On-Chain Notes Supported by U.S. Treasuries

GUSD is a flexible, principal-protected product launched by Gate. Users mint GUSD by depositing USDT or USDC at a 1:1 ratio, receiving a yield certificate. Unlike traditional stablecoins, GUSD resembles an on-chain dollar note—backed by low-risk real-world assets like U.S. Treasuries and Gate ecosystem income, accumulating returns during holding, with principal and interest settled upon redemption.

As of May 28, 2026, GUSD's reference annualized yield is 3.00%. This yield level aligns reasonably with the current 2-year Treasury yield of 4.0349%, with the spread reflecting product structure, liquidity premium, and risk adjustments. GUSD's design aims to bring the "maturity yield" concept of traditional notes into the on-chain realm, making cash management more akin to traditional bonds or notes.

GUSD's yield derives from U.S. Treasury interest and Gate ecosystem income. U.S. Treasuries, as globally recognized safe assets, provide a solid value underpinning for GUSD. Meanwhile, ecosystem income acts as an additional yield source, helping the product maintain some stability amid Treasury yield fluctuations. This dual-track yield structure ensures asset safety while supporting sustainable returns.

How RWA Narratives Reshape the On-Chain Yield Landscape

The tokenization of real-world assets (RWA) experienced explosive growth in 2026. By May 2026, the total on-chain tokenized RWA market size reached between $31 billion and $34 billion, several times larger than the $5.4–6 billion at the start of 2025. Data from RWA.xyz shows over 796k holders, with this growth primarily driven by institutional centralized deployments.

Tokenized U.S. Treasuries are the main growth driver. By May 2026, the market for tokenized Treasuries approached $15 billion, surging from about $3.9 billion at the start of 2025, making it the largest single category within RWA. Including broader representative assets, the total tokenized asset volume exceeded $381.8 billion, with Ethereum holding about 55% market share. Standard Chartered's global digital asset research director notes that Ethereum's leadership stems from its long-standing security record, extensive institutional ecosystem, and mature compliance tools—factors that make it the "defensible default choice" for institutional investors.

The tokenized commodities market approaches $6 billion, and tokenized private credit exceeds $4.5 billion, growing over ninefold. RWA perpetual contracts traded $524.8 billion in Q1 2026, surpassing the total volume of 2025. These figures indicate that RWA is evolving from a focus on "single Treasury" to a diversified asset portfolio.

Within this narrative, GUSD's positioning becomes clear: it is a bridge product connecting traditional interest-bearing assets with on-chain yield demand, embodying the RWA narrative at the retail user level.

How to Build a USD Yield Portfolio and Stable Income Structure

In the current interest rate environment, constructing a USD yield portfolio involves layered allocation to balance stability and yield resilience.

Base yield layer. Use low-volatility products like GUSD, USDT YieldBox as the foundation. As of May 28, 2026, Gate's platform reference annualized yields are: GUSD 3.00%, USDT 4.69%, ETH 4.31%, SOL 8.50%, USDS 2.21%, GT 0.86%. GUSD and USDT provide stable cash flows, suitable as primary allocations for idle funds. Gate private wealth management data shows that in April 2026, USDT strategies averaged a 5.6% annual return with a maximum drawdown of only 0.01%.

Yield enhancement layer. Increase overall returns through participation in periodic and activity-based products. Gate YieldBox VIP 30-day yield can reach 4.5%. Additionally, Gate's on-chain earning protocol Spark offers about 4.5% annualized yield on USDT staking, with a bonus pool of 50,000 USDT during promotional periods.

Flexible yield layer. Combine stablecoin yields with other token incentives via activities like Launchpool. GUSD users can enjoy both minting yields and Launchpool double rewards. This structure allows users to maintain principal safety while earning additional ecosystem incentives.

In portfolio management, dispersing lock-up periods helps respond flexibly to rate changes. When market expectations favor Fed rate cuts, increasing allocations to fixed-term products can lock in higher yields; when rates are expected to stay stable, the flexibility of flexible products becomes more valuable. It’s important to note that the referenced annualized yields are not fixed and fluctuate daily based on user participation and staking rewards. The above content does not constitute investment advice; users should make independent judgments based on their own circumstances.

Conclusion

The connection between the USD interest rate system and the on-chain yield market is becoming increasingly direct as RWA infrastructure develops. Whether it’s stablecoin yields, tokenized Treasuries, or products like GUSD, their underlying logic is no longer confined to internal crypto capital games but is now deeply linked to the global dollar liquidity environment.

For users, understanding the transmission chain of "Treasury yields—USD interest rates—on-chain yields" is more important than merely watching short-term yield changes. As on-chain assets gradually integrate with real-world financial systems, their sources of returns are shifting from purely crypto incentives to a diversified structure supported by Treasuries, notes, and real-world cash flows.

GUSD’s significance lies in providing on-chain users with a product that more closely aligns with traditional USD fixed-income logic. In an environment where high interest rates may persist, on-chain USD assets centered on stable returns are gradually becoming a crucial bridge connecting traditional finance and the crypto ecosystem. As the RWA market continues to expand, the focus of on-chain financial competition will shift from simply high yields to transparency of yield sources, asset security, and long-term stability.