Weekly Interest Rate Roundup: Mar 15 - Mar 22

Not much changed this week. The DAI and USDC positions on Compound and Aave have stayed pretty stable, and that's kept the supply rates more or less unchanged. The market has recovered somewhat though, and increases in the COMP and AAVE token prices have pushed recursive lending rates higher.

It's interesting that divergences in the yields between Compound and Aave on DAI have remained relatively persistent. The DAI yields on Compound have been consistently higher than on Aave in terms of the baseline supply rate as well as the recursive yield. This suggests that DAI holders either don't consider Aave and Compound interchangeable, or that there isn't all that much DAI capital which does and actively switches when one of the platforms yields more than the other. Perhaps the gas costs of switching from Aave to Compound outweigh the marginal yield benefits, but still I find it surprising to see this divergence persist.

This was a quiet week for Notional - in general we have seen that lending volumes increase when token prices are falling and vice versa. Maybe users place a higher value on the opportunity cost of their capital when the market is going up.

Otherwise, Element launched a new September maturity for USDC and rates on Yield moved up somewhat. It looks like borrowers finally took advantage of the low rates offered on Yield to some extent. Something coming on the horizon is Yield's support for Notional's fCash as collateral. Users will be able to lend on Notional, borrow against that loan on yield, and then lend more on Notional. It will be interesting to see how this affects the rates available on both platforms.

Teddy