Trading Future Yield, Now.
Fixed Income meets Leveraged Yield
A new generation of DeFi protocols is taking aim at extremely popular concepts in TradFi:
- fixed interest investing
- decomposing fixed income assets into principal and interest only
- leveraged yield trading
Splitting assets can be the holy grail of finance, with different slices appealing to different investors, each willing to pay a premium for an exact solution to each of their needs. Early arbitrage desks in the 1980s profited from stripping coupons from US Treasuries and corporate bonds and selling the resulting zero coupon instruments to investors who wanted absolute certainty as to the date and size of their investment return. Mortgage traders did the same with securitized Agency-backed debt, slicing and dicing the cash flows into less and more-leveraged alternatives, tailored for each investor class. Profiting from such decomposability made the Wall Street banks and their traders very rich.
