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Use-cases

How to profit from yield fluctuations

To sum it up, we provide a visual representation of the possible scenarios that investors may face when holding a yield-bearing token and how Tempus can help them benefit from each of them.
Let’s go through the details of what each strategy entails:

Swap Yield for Capital tokens

This strategy allows users to lock in a fixed yield in advance to be collected at maturity. Fixing a certain return upfront comes at the cost of reducing the exposure to potentially higher variable yield. When determining the number of Yield tokens to swap for Capital tokens, users must strike a balance between the fixed return they want to lock and the variable yield income they are willing to accumulate in exchange for the fixed yield. This strategy plays well in volatile markets where variable yields will likely decrease over time.

Provide liquidity

This strategy allows users to earn swap fees from all trading activity taking place on TempusAMM. When yields are rising, people will trade Capital for Yield tokens and vice versa in case of falling yields. Regardless of where yields go, liquidity providers will earn fees as long as people trade. However, the more yields move over time, the higher the risk of impermanent loss for liquidity providers. This strategy is ideal when volatility is low and yields are expected to stay flat until maturity.

Swap Capital for Yield tokens

This strategy allows users to amplify their exposures to variable yields and, in the case of an increase in interest rates, earn significantly more than the underlying yield-bearing token APR. Since users need to give up Capital tokens to increase their exposure to variable yields, their fixed return will decrease proportionally and they could suffer capital losses in the case of a fall in yields. This strategy is suited for volatile market phases with rising variable yields.