Rates held steady this week at Term with 1.3mm USDC cleared at 4.80% and 414 wrapped ETH cleared at 2.45%  for four-week fixed terms. Overall demand for fixed-rate borrow remains strong amidst a backdrop of rising DeFi borrow rates.

Historical ETH and USDC clearing rates on Term

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Variable Rate Markets

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USDC Markets

In the variable rate markets, USDC rates reaccelerated to the upside with borrow rates rising +50bps from  7.56% to 7.96% on a 30-day trailing basis. image 63

Volatility in variable rate USDC markets continue to remain elevated across the board, suggesting that the decision to up the Aave base rate to 5% may have been too conservative. The headline rate seen on the Aave UI in the past week ranged anywhere from 5% to 20% depending on the time of day one visited the site.

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ETH Markets

ETH borrow rates on Aave V3 held steady on a 30-day trailing basis rising just a tad from 2.84% to 2.85%, consistent with a stable CESR Staking Index.

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Overall, supply continues to increase at a slightly faster rate than borrow demand helping to keep utilization just below the 80% UOPT level.

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Consistent with the pattern that began to emerge last week, however, signs of stress continue to present in the market. Intraday borrow rates spiked on multiple days this past week and saw peak intraday borrow rates of 67.13% at the highs.

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Macro

On the supply side, stablecoin supply increased over the past month by roughly +$3.1 billion. Tether continues to be the primary beneficiary of inflows while USDC saw an improvement of around $500mm. The BUSD transition to FDUSD is well underway with FDUSD market cap flipping BUSD over the past month.

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As DeFi rates continue to rise and TradFi rate cuts materialize next year, expect inflows to continue to flow into the ecosystem.

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