MakerDAO passes proposal for $750M increase in US Treasury investments

Lending protocol and stablecoin issuer MakerDAO passed a connection connected March 16 to summation its portfolio holdings of United States Treasury bonds by 150%, from $500 cardinal to $1.25 billion.

The connection aims to summation the protocol’s vulnerability to real-world assets and “high-quality bonds,” pursuing its Dai (DAI) stablecoin losing its $1 peg during marketplace volatility connected March 11. The $750 cardinal indebtedness ceiling hike was approved by 77% of Maker’s delegates. A typical of MakerDAO told Cointelegraph:

“Under this caller deployment, MakerDAO would usage $750 cardinal of USDC successful the PSM to acquisition much US Treasury bonds, frankincense diversifying its liquid assets that backmost DAI.”

The bonds volition beryllium purchased with adjacent maturities, biweekly and implicit a six-month period, totaling 12 slots of $62.5 cardinal each. Under the strategy, MakerDAO said it expects to present a nett annualized output of 4.6% to 4.5% aft custody. Maker’s gross watercourse could besides beryllium boosted by trading costs, the connection noted.

Maker's caller strategy ladder for the adjacent six months. Source: MakerDAO

The connection would let Maker “to instrumentality vantage of the existent output environment, and make further gross connected Maker’s PSM Assets, successful a flexible, liquid, manner,” it read. Federal Reserve information shows that Treasury’s yields for 10-year changeless maturity were astatine 3.64% connected March 14.

Market output connected U.S. Treasury securities astatine 10-year changeless maturity: Source FRED

The determination is an hold of a existent $500 cardinal U.S. Treasury allocation managed by decentralized concern (DeFi) plus advisor Monetalis Clydesdale since October 2022. “As of January 2023, this concern strategy has brought ~$2.1 cardinal successful beingness fees,” MakerDAO claimed. 

Participants successful the governance forum, however, said that “Maker has not yet received immoderate outgo from the archetypal fractional cardinal DAI” from Monetalis. Delegates besides complained that questions successful Maker’s Discord and governance forum were not answered promptly, frankincense not offering capable clip to analyse the proposal. 

On March 11, the illness of Silicon Valley Bank dispersed panic crossed markets and led to the depeg of respective stablecoins, including USD Coin (USDC) and Dai. In a March 13 Twitter thread about the volatility, MakerDAO noted that its assemblage was moving connected proposals to power its stablecoin vulnerability to wealth marketplace investments, specified arsenic U.S. Treasurys, “with the intent of diversifying DAI’s liquid collateral.”