Principal and yield (PT / YT)

For a step-by-step walkthrough of the maths, see How PT and YT are priced.

Most users never handle PT and YT directly: the app presents outcomes such as Lock Fixed Rate or Sell Future Yield. This page explains what happens underneath.

Note

Examples on this page use a 1-year maturity at the 2.80% indicative testnet rate, the same as the Aureus website. Values are rounded and assume 1 PAXGy ≈ 1 PAXG. They are not quotes or forecasts.

The split

10 PAXGy
   ↓
Aureus
   ↓
10 PT  +  10 YT

Depositing PAXGy moves it into the Aureus Vault: you no longer hold the PAXGy directly. For a given maturity, the vault mints the same number of PT and YT. Aureus does not create, for example, 9.73 PT and 0.27 YT. What differs is their market value:

10 PT × ≈ 0.973 PAXG = ≈ 9.73 PAXG
10 YT × ≈ 0.027 PAXG = ≈ 0.27 PAXG
─────────────────
PT value + YT value ≈ original PAXGy value

Aureus does not create value from nothing. It separates principal and future yield into independently tradable exposures. PT and YT of the same maturity can be recombined to withdraw the original position before maturity.

Why not just hold PT + YT?

Holding PT and YT together is economically the same as holding PAXGy, which already earns the gold yield. There is no reason to use Aureus just for that. Aureus does not create the underlying gold yield. It creates a market for it. The reason to use Aureus is to sell, buy, hedge or lock that yield.

PT — Principal Token

Gold-denominated, zero-coupon-like exposure.

Today        10 PT cost ≈ 9.73 PAXG
               ↓
Maturity     10 PT redeem for 10 PAXG

• Bought below the maturity value, redeemed for the principal at maturity.
• Economically similar to a zero-coupon instrument. PT is not legally a bond.
• The difference between price and redemption value is what creates a fixed rate.
• Maturity-specific and independently transferable.
• Not risk-free and not principal-protected: PT remains exposed to the underlying asset and to protocol risk.

PT payoff is principal-only

The rate on PT is market-implied: it comes from the discount between PT’s market price and its 1 PAXG redemption value. Aureus does not set it.

Once PT and YT are split, extra yield never increases the PT payoff. It belongs to YT. Per unit of underlying:

Underlying ends up worth	PT receives	YT receives
1.05 PAXG	1.00 PAXG	0.05 PAXG
1.01 PAXG	1.00 PAXG	0.01 PAXG

PT = fixed principal claim. YT = variable future-yield claim.

YT — Yield Token

Exposure to the future yield generated by the underlying yield-bearing gold until maturity.

The seller: keep your gold, sell its future yield

A PAXGy holder deposits 10 PAXGy, receives 10 PT + 10 YT and sells the YT immediately:

Today        sell 10 YT × ≈ 0.027 → receive ≈ 0.27 PAXG
             keep 10 PT
Maturity     10 PT       → 10 PAXG

The holder has monetised future yield today without selling the gold principal exposure.

The 0.027 PAXG per YT is the market’s estimate of the yield each PAXGy will earn until maturity, not a fixed amount. Over the term, YT collects the yield actually generated and its market value falls toward zero at maturity:

Actual gold yield over the term	1 PT pays	1 YT has collected	PT + YT
2.80% (as expected)	1.00 PAXG	0.028 PAXG	1.028 PAXG
4% (higher)	1.00 PAXG	0.04 PAXG	1.04 PAXG
1% (lower)	1.00 PAXG	0.01 PAXG	1.01 PAXG

The seller has fixed their total at about 10.27 PAXG. Whoever holds the YT takes the difference, up or down.

Gold price vs gold yield

YT carries only the yield, never the gold price. PT redeems in PAXG, so if the price of gold rises, the PT holder’s 10 PAXG are worth more: that gain stays with the principal.

The buyer: a view on gold rates

Why would someone buy that YT? Because they think gold will yield more than the market expects.

	Scenario A	Scenario B
Buyer pays for 10 YT	0.27 PAXG	0.27 PAXG
Actual yield	4% → 0.40 PAXG	1% → 0.10 PAXG
Net outcome	+0.13 PAXG	−0.17 PAXG

YT is exposure to future gold yield and gold rates, not direct exposure to the gold price itself.

Natural buyers of YT include:

• Rate traders who want exposure to gold rates without exposure to the gold price.
• Gold borrowers who pay variable gold-linked rates and buy YT to hedge rising rates (see Hedge gold yield).
• Market makers who buy YT to provide liquidity and earn the spread.
• Lending protocols that want to hedge the gold rates they pay or earn. Its value tends toward zero as maturity approaches, because less future yield remains.

Every use case is a PT / YT combination

Strategy	PT	YT	Result
Sell Future Yield	Keep	Sell	Future yield paid today, gold principal kept.
Lock a Fixed Gold Rate	Buy / Hold	—	Principal bought below its final value and held to maturity.
Trade Future Gold Yield	—	Buy / Hold	A focused position on what gold will yield.
Provide Liquidity	Pool	Pool	A share of trading fees, with pool price risk.

Hedge Gold Yield uses these same positions, depending on which way rates would hurt you. See the guides in Using Aureus.