MakerDAO is considering a proposal to increase its US treasury bond investments from $500 million to $1.25 billion. This proposal aims to take advantage of the current yield environment and generate further revenue for Maker’s PSM assets.
The investment strategy will be implemented over a six-month period using a ladder strategy that will mature every two weeks. The proposal is in line with MIP105 calculations for RWA allocation towards the Viridian Cluster.
If the proposal is approved, US treasuries will be purchased in maturity slots over a six-month period. This will result in 12 “slots” over the six months, with bi-weekly maturity slots for a total of $62.5 million per slot.
Expected Benefits Of MakerDAO’s Proposal
After the US treasuries mature every two weeks, the net yield amount will be transmitted to the surplus buffer. The proposal includes a legal structure that mitigates any single-entity exposure concerns.
The debt ceiling increase will be deployed under the same terms and transaction mechanisms as set out and approved in MIP65. Also, the proposed debt ceiling increase of 750M for MIP65 will be calculated bi-weekly and adjusted accordingly to ensure that it is in line with MIP105 allocations.
The proposed asset strategy is a simple and transparent solution. The ladder strategy will allow for inherent liquidity in the US treasuries as they mature. The large liquid market will enable quick and low-cost entry or exit of capital. Additionally, the strategy has strong yield characteristics with the highest possible credit rating.
The asset strategy implementation partner will be Sygnum Bank, which will implement the asset strategy under an execution mandate set out in a MakerDAO resolution instruction.
This proposal aims to balance Maker’s portfolio with yield and risk considerations, and the fact that the investment will be in a flexible and liquid manner can accommodate material adjustments and upgrades as may be required under prevailing, relevant Maker RWA-related policies.
The proposal is expected to be beneficial to MakerDAO, and the set of MakerDAO resolution instructions required to implement the specific deployment will be released shortly ahead of a Debt Ceiling Increase Poll.
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