On March 16, the stablecoin lending and issuer protocol DAI, MakerDAO adopted a proposal to increase its holdings of bonds of the US Treasury of 150%going from $500 million to $1.25 billion.
Maker Governance approved an extension from $500 million to $1.25 billion for its US Treasury investments
In this process, MakerDAO would use $750 million of USDC in the PSM to acquire more US Treasury bonds, thus diversifying DAI’s liquid backing. pic.twitter.com/6IH6QKcEax
—Maker (@MakerDAO) March 16, 2023
The objective of this proposal is to increase the exposure of the protocol to real assets and to high quality bonds, following the loss of the $1 peg of its stablecoin Dai during market volatility on March 11. The $750 million debt ceiling increase was approved by 77% of Maker delegates. A representative from MakerDAO said:
In this new rollout, MakerDAO would use $750 million of USDC in the PSM to buy more US Treasury bonds, diversifying its assets liquids supporting the ICD.
MakerDAO will buy $750 million in 6-month US Treasury bonds
Bonds will be purchased with equal maturities, every two weeks and over a period of six months, for a total of 12 tranches of $62.5 million each. According to this strategy, MakerDAO expects to deliver a net annualized return of 4.6% to 4.5% after custody. The income of Maker could also be bolstered by transaction costs, the proposal noted.
The proposal would allow Maker “ take advantage of the current yield environment and generate more income on Maker’s PSM assets in a flexible and liquid manner “, according to the text. The data of the Federal Reserve show that 10-year constant-maturity Treasury bond yields were 3.64% on March 14.
The initiative is an extension of a current allocation of $500 million in US Treasury bonds, managed by the asset adviser of the decentralized finance (Challenge) Monetalis Clydesdale since October 2022.” As of January 2023, this investment strategy has earned approximately $2.1 million in lifetime fees “, asserted MakerDAO.
However, participants in the forum of governance indicated that ” Maker has yet to receive payment of the first half of the billion DAI ” of Monetalis. Delegates also complained that questions posted on Discord and the forum governance from Maker were not answered promptly, leaving insufficient time to analyze the proposal.
On March 11, the collapse of the Silicon Valley Bank caused panic in the markets and led to the disconnection of several stablecoinsof which USD Coin And dai.
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