Frax Finance Launches Fraxbonds, Bringing US Treasury Yields On-chain

Samuel McCulloch
Samuel McCulloch
Jan 19, 2024
Frax Finance Launches Fraxbonds, Bringing US Treasury Yields On-chain

Today the Frax team announced the launch of the long awaited Fraxbonds. These novel and brand new RWA-like asset products mimic the yield curve of US treasuries.

Fraxbonds offer discounted FRAX at rates that are similar to off-chain short term treasury yields. By choosing one of 3 annual maturity dates, a FRAX holder can swap their FRAX away and be sure they will earn a fixed yield over the period. FraxBonds mature on December 31 or June 30. As soon as the nearest token matures, a new token appears in the factory for minting.

FXBs can be bought onchain entirely permissionlessly using a gradual Dutch auction (GDA) mechanism in governance approved batches.

According to Sam K, the USD needed to purchases US Treasuries is swapped out daily and then sent to FinresPBC.

"The physical FRAX inside the actual FXB auction contract isn't used directly. An equivalent amount of FRAX is minted or LPs burned to remove USDC/USDP/PYUSD from the POL on Curve to make the conversion. Economically, it is identical. The accounting is just simpler. And the balance sheet will show the tbills and the fiatcoin that goes out of it so it should be simple to follow"
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Three FXB expirations are available at launch, 06-2024, 12-2024, and 12-2026. Currently they are offering interest rates of 5.52%, 5.22% and 4.05% respectively.

Staking and Liquidity

All three FXB's are available for providing liquidity on Curve, with a combined TVL of $1.8m and high initial CRV yields funded through bribes. All three pools have CRV gauges.

In addition to the CRV gauges, these FXBs all are available for locking in Frax's staking module. While there is no TVL deposited in the staking contracts at the current moment, it's showing 5 digit yields for Arbitrum (go STIP).

Hourglass Adds FXB Index

We also had an announcement from Hourglass that they are releasing HFXB, a fungible index token. This product allows for access to generalizable FXB yields without having to worry about rollovers and liquidity issues.

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