Types of LSBs

Overview

At launch, Pye.fi will only support strip bonds with single-strip coupons. Future releases will include multi-strip bonds, zero-coupon bonds and vesting schedules for assets with more complex yield distributions.

Pye Finance will allow users multiple ways to use their principal

​Single-Strip Bonds

Single-strip bonds issue two assets, the principal component and the yield component. Both assets are locked up for the same duration and are minted in equal amounts. For example, a 100 SOL deposit locked up from January 2025 till March 2025, would issue the following tokens:

• 100 PSOL-DEC25-MAR25

• 100 YSOL-DEC25-MAR25

Each YSOL is redeemable for the yield produced by 1 PSOL during the lockup period (1 year). In short, as long as yield can be accrued between 2 unix timestamps, it could be tranched into a single strip (from start date to maturity date).

Yield Requirements

• End-of-Term Payout: Where yield is claimable only at the end of the lockup.

​How they trade

Since yield strips from a strip bond are traded separately, they can respond more flexibly to changes in interest rates across different maturities than a zero-coupon bond with a single YTM. For instance, if the yield curve is steeply upward sloping, long-dated strips may trade at higher yields compared to the YTM on a shorter-dated zero-coupon bond.

The opposite is also possible if on Solana, the yield in Sep 2025 is 76% and the yield is expected to fall down to 6.75% by Dec 2025, then the yield strip for SEP-2025 will trade closer to 3% while the longer dated strip trade closer to 2.75%.

Historically, when the yield component is sold separate from the principal component it leads to behavior where the principal component becomes sensitive to interest rate changes; if rates rise, the price of the principal components falls more than bonds with more coupons given the longer duration.

​Multi-Strip Bonds

Unlike single-strip bonds, multi-strip bonds issue $1+N1+N$ assets, the principal component and the $NN$ number of yield strips (coupons). In the case of a monthly-strip bond, a 1 year lockup issues one token related to the principal:

• 100 PSOL-DEC25-DEC26

And twelve tokens related to the yield component:

• 100 YSOL-DEC25

• 100 YSOL-JAN26

• 100 YSOL-FEB26

• 100 YSOL-MAR26

• 100 YSOL-APR26

• 100 YSOL-MAY26

• 100 YSOL-JUN26

• 100 YSOL-JUL26

• 100 YSOL-AUG26

• 100 YSOL-SEP26

• 100 YSOL-OCT26

• 100 YSOL-NOV26

Each YT (eg. 100 YT-MAY26) is redeemable for the yield produced by 1 PSOL from the start of that month till the end of the month (May 1st → May 31st). The yield for a given YT becomes available immediately after maturity is reach on May 31st, for that specific strip.