Mid-Month Rates Changes Proposal 19 Feb 2021

Authors: @Primoz @LongForWisdom, @Monet-supply, @SebVentures, @Akiva, @hexonaut, @ultraschuppi

In the Rates Group Meeting for the February Proposal it became already clear that the SF increase for ETH-A and ETH-B will probably not help on slowing down on the appetite.

Around 400MM of DAI has been minted from ETH-A alone, the increase of SF has not slowed down the minting rate.

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Additionally something else changed: Two weeks ago 15% (or 132MM of DAI-from-ETH-A) were coming from vaults with a CR of <225%. Today it is 38% (or 500MM of DAI-from-ETH-A). This recent worsening of CR distribution considerably increased the risk profile of ETH-A according to @Risk.

The Rates Group will tackle the situation in more detail in the next meeting, but as immediate action @Risk will run an onchain-poll about increasing the SF for ETH-based vaults starting next Monday:

  • increase the SF for ETH-A by 1% from 4.5% to 5.5%
  • increase the SF for ETH-B by 1.5% from 7.5% to 9%

We will have ETH-C soon so we have another option for vault-owners who want to stay heavily overcollateralized - but the risk has been heavily changed in the last weeks so we are forced to mitigate it.

13 Likes

Curious question. What is the counter-balance that would allow the rates to come back down for ETH-A/B/C ? Other collaterals being used more as portfolio?

From my seat, the issue is credit concentration (which is impacting the risk profile of the portfolio as a whole). Thoughts?

6 Likes

Don’t we want to increase the PSM buffer with it too.
Action will have reaction.

so far the PSM-DC hasn’t been hit, also there is plenty of headroom in USDC-A. I don`t think we have an issue there

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There is a vote to turn usdc to 0, I believe.

It won’t win

2 Likes

Fair enough

Regardless of CR risk, 4.5% is very low and heavily subsidized compared to ETH collateral rates elsewhere in DeFi. We have room to raise a little bit and still be competitive.

We should do this. Now is a good time to increase SF. As long as we have an interest rate advantage in the similar DEFI lending market, we should raise interest rates.

I know gasprices are crazy right now, nevertheless: the poll is online since yesterday and will run until 2021-02-25T16:00:00Z- please vote!

1 Like

Can I ask what the calculus for the ETH-B rate is? That DC has been maxed out for so long it makes me feel like it’s under-priced.

7 Likes

the exec containing the rates changes is online, gasprices are pretty low - so please help on letting this pass.

3 Likes

the exec just passed. in 48h we are going to have the new rates on ETH-A and ETH-B

thanks everybody for voting on that one!

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The SF decisions are quite interesting and I’ve not yet read much about it. Do you have suggestions where I could start to read? I’d be glad if I could get some input. Maybe you have also got some interesting decisions in the past, where I could start?
Thank you in advance.

Topics tagged rates-working-group will show you the previous proposals, which all include rationale behind the proposed changes.

4 Likes