Pendle's principal tokens derive their fixed yield from purchasing below redemption value, but selling before maturity can convert a seemingly guaranteed return into a loss. Market prices and transaction fees, rather than the expected payoff, determine outcomes for early sellers of these yield-bearing instruments.
The mechanism highlights the risk inherent in treating principal tokens as fixed-income products: while holding to maturity locks in the discount-to-redemption spread, exiting early exposes holders to secondary market volatility and fee drag that may erode or reverse gains.
Pendle Principal Tokens Risk Loss on Early Exit Despite Fixed-Yield Design
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