How the two share prices stop coupon sniping
sUSDest has a deposit price and a redemption price. The gap between them is exactly the coupon that has accrued but not yet been paid.
3 min read
sUSDest has two share prices, which stops depositors from sniping coupons. The redemption share price applies when a redemption request is serviced at epoch close; the deposit share price is what you pay when you stake USDest.
The gap between the lines is the accrued-but-unpaid coupon: it collapses when the coupon is received and reopens as the next one accrues.
Problem and fix
Bond coupons are lumpy: a bond paying 8% a year semi-annually pays 4% of its face value in one transaction. With a single price, anyone could deposit just before a known coupon date, capture the NAV step-up when the coupon lands, and redeem soon after. Deposits are permissionless and coupon dates public, so that would be a timing arbitrage against long-term holders.
So the deposit share price accrues every performing bond's coupon continuously from its last coupon date, under the bond's own day-count convention: new depositors pay for coupon that has been earned but not yet received. The redemption share price counts only settled cash, coupons and base yield that have actually reached the vault, so holders who leave take nothing the vault has not received. Neither price involves any discretion; the deposit price is always greater than or equal to the redemption price.
A worked example
The vault holds 30,000,000 USDest in reserve and 70,000,000 face value of a bond paying 8% a year, semi-annually, carried at par. Supply is 100,000,000 sUSDest. Five months have passed since the last coupon. The bond is illustrative. Not guaranteed. Not a bank deposit.
| | Value | | ---------------------- | ----------------------------------------- | | Redemption NAV | 30,000,000 + 70,000,000 = 100,000,000 | | Accrued coupon | 70,000,000 × 8% × 5/12 = 2,333,333 | | Deposit NAV | 102,333,333 | | Redemption share price | 1.0000 | | Deposit share price | 1.0233 |
One month later the 2,800,000 coupon is received: redemption NAV rises to 102,800,000, the redemption share price becomes 1.0280, and with accrual restarted from zero the deposit share price is also 1.0280.
Without this mechanism:
- Bob holds sUSDest for six months while the bond earns its coupon.
- Alice deposits one minute before the coupon arrives, at 1.0000, and captures a +2.8% step-up with almost no time at risk.
- Alice requests redemption and takes yield that Bob and other long-term holders earned.
With two prices, Alice pays 1.0280 on the way in and captures nothing.
Edge cases and integrators
A late coupon within grace keeps accruing in the deposit price; the redemption price is unaffected until cash arrives. A recorded credit event stops that position's accrual and drops it out of the deposit price; an impairment reduces its carrying value, which lowers both prices.
Protocols that value sUSDest as collateral should use the redemption share price, with a cap on how fast the rate can grow. It is the conservative, cash-settled value that convertToShares and convertToAssets report. sUSDest uses dynamic forward pricing rather than a fixed redemption fee because it tracks each bond's actual accrued coupon more precisely.