Principal Tokens

Part of the yield engine. Approved by governance; discussion and analysis on the governance forum.

What are Principal Tokens

Principle Tokens (PT) are a type of token associated with the popular DeFi protocol Pendle. Pendle splits yield-bearing assets into two components: Principal Tokens (PTs) and Yield Tokens (YTs).

PTs represent the right to redeem the underlying asset 1:1 at maturity. By buying PTs at a discount, investors effectively lock in a fixed yield.

The APY of a PT reflects the market’s expectations for future yields and gradually converges towards a price of 1, meaning that one PT can be redeemed for exactly one of the underlying tokens at maturity.

For Noon, PT buying is attractive because it combines high fixed yield with deep liquidity. Our strategy focuses only on PTs backed by highly liquid, trustworthy protocols and sufficient secondary market depth.

Noon Deployment Analysis: Summary

Return generation mechanism

Principal Tokens (PTs) convert floating DeFi yields into a known rate. The rate is "fixed" in a specific, qualified sense: it is locked only if the PT is held to maturity, and it remains conditional on the solvency of the underlying protocol and asset. Sold before maturity, a PT's price floats with prevailing rates. The published analysis found PT rates at the time exceeded T-bill rates.

Documents

• A full risk assessment can be found archived in Noon's Governance Forum

• Primer: Principal Tokens Primer