LlamaRisk, acting as Aave risk stewards, has proposed increasing the optimal utilization threshold for USDC, USDT0, and GHO on Aave V3 Monad from 90% to 92% while cutting the Slope2 penalty rate from 40% to 20%. The change is motivated by both USDC and USDT0 repeatedly exceeding the current 90% threshold over the past 30 days, triggering borrow APYs as high as 12.36% for USDC and 20.35% for USDT0 under the steep current curve.
For Armada's crypto repo desk, these parameter changes are directly relevant to rate benchmarking. DeFi lending rates on Aave serve as a real-time reference for institutional borrowers evaluating whether to use Armada's repo facility or on-chain alternatives. Reducing Slope2 dampens the spike risk that previously made Aave rates volatile and unattractive at high utilization, which could narrow the pricing advantage Armada currently holds during periods of DeFi rate stress. The rate model should be updated accordingly.