Aave Lists December AUSD Principal Token on Monad With 93% Borrowing Limit

Aave brings Pendle AUSD principal token to Monad lending

Aave has added Pendle's AUSD principal token maturing on December 17, 2026, to its V3 lending market on the Monad blockchain. The token can now be used as collateral for stablecoin loans.

Principal tokens, or PTs, are a type of token created by Pendle that represent the fixed principal portion of a yield-bearing asset. Holders receive the underlying asset's value at maturity in exchange for giving up any yield along the way. This listing gives holders of the earlier October AUSD principal token a place to roll over their positions as that previous token nears expiry.

Supply cap filled quickly

The new reserve has reached its 30 million-token supply cap. As of October 8, Aave displayed $29.67 million in supplied tokens.

• Maximum loan-to-value ratio: 93%
• Liquidation threshold: 95%
• Liquidation bonus: 2.62%

These limits mean borrowers who take the maximum loan have very little buffer before their position could be liquidated if collateral values drop or debt rises. To use the token as collateral, users must select its dedicated E-Mode, a category that offers higher borrowing limits.

Borrowers can take out loans in USDT0, USDC, GHO, USDe, or mUSD against the principal token. The principal token itself cannot be borrowed.

Governance and risk parameters

Governance proposal 525, submitted by TokenLogic, was marked as executed. The Monad execution transaction succeeded on October 8 and set the supply cap and E-Mode parameters.

LlamaRisk will update the discount rate and E-Mode risk parameters through maturity, the firm said in its launch announcement. The onchain oracle carries an initial annual discount rate of 5.745%, with a maximum of 8.804%. This is a pricing input used to value the token, not the interest rate borrowers pay.

Under LlamaRisk's published framework, changes to the discount rate affect the oracle's valuation, while changes to E-Mode can adjust loan-to-value limits, liquidation thresholds, and liquidation bonuses. These updates pass through governance-controlled risk-agent permissions and safety checks. Aave has previously used the same approach for Pendle collateral on the Plasma network.

What happens at maturity

At the December 17 maturity, each principal token redeems for one AUSD, according to LlamaRisk's asset assessment. This principal claim exists independently of whether Agora continues the yield rebate that supports the Pendle market.

Aave permits liquidation when a borrower's health factor falls below one, meaning a position can move closer to liquidation even without the borrower taking out additional debt. A higher discount rate lowers the token's collateral valuation, which reduces the health factor.

LlamaRisk's October 8 review noted approximately 44.74 million tokens from the October reserve were still supplied at its maturity, indicating significant overlap between the two tranches.

Why this matters for DeFi users

The listing expands the range of Pendle principal tokens accepted as collateral on Aave, giving users more flexibility in managing fixed-income strategies. It also creates a rollover path for October maturity holders.

The tight borrowing parameters reflect the relatively short time remaining until December maturity. As the token approaches expiry, its oracle valuation will converge toward its redemption value of one AUSD per token.

Sources

• The Defiant

Read also: Crypto lending surges 55% but new risks emerge