Fixed rates on Term rose slightly this week with USDC stablecoin rates against sDAI collateral rising to 3.47% and ETH rates rising to 2.36%.  Of note was increased demand in the USDC/wstETH auction that cleared 260k at 4.70% - a record rate for that token pair.  

Historical ETH and USDC clearing rates on Term

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Stablecoin Supply

Since the November 1 Fed meeting, which marked the first time the Fed held steady in two consecutive meetings since it first began hiking in March 2022, stablecoin supply has been on the rise. The timing of this increase in stablecoin supply seems to be more than pure coincidence and comes on the back a mini-bull run in the two weeks leading up to the much anticipated Fed meeting on November 1 and was preceded by a sharp rise in DeFi interest rates.

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Of this increase of around +$2.7bn in the past month, the majority has come from growth in USDT, which USDC and DAI continue to see redemptions.

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Variable Rate Markets

USDC Markets

In the variable rate markets, USDC rates held steady with the rate of acceleration in the 30-day trailing average borrow rate finally taking a breather. Week-on-week rates rose +22bps from 6.84% to 7.06% on a 30-day trailing basis.

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Volatility in variable rate USDC markets continue to remain elevated across the board but muted relative to recent extremes.

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ETH Markets

ETH borrow rates on Aave V3 declined -8bps from 2.95% to 2.88% on a 30 day trailing basis but did notch at +14bp rise in the spot borrow rate over the past seven days.  This rise in the spot borrow rate is consistent with the +9bps rise in the 30 day trailing CESR staking rate from 4.05% to 4.14%.

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As foreshadowed in last week's newsletter, utilization increased by 5 percentage points to 78.62%, with borrow demand up by +3.7k ETH and supply falling by -22.5k ETH.

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