# Yield Coin The **Yield Coin** is the senior tranche of a Covenant Market: a fully collateralized debt claim on the Base Asset, minted when collateral is deposited and redeemable back to the Base Asset on demand. A Yield Coin is a perpetual, zero-coupon bond. It is issued at par to its NAV (notional) and trades on the Latent Swap AMM at a price below par. The discount to NAV *is* the yield: a holder who buys at a price `P` soft-locks an implied APY of `r = -ln(P / D)`, where `D` is the market's debt duration parameter. As the implied rate moves over time, the Yield Coin's NAV accretes (or, in extreme cases, decretes), so the position remains a tradeable claim on the underlying collateral at all times. ## Where the yield comes from Yield Coin holders receive funding from Leverage Coin holders in the same Covenant Market. Funding is not paid as a separate cash flow; it accrues continuously as a transfer of NAV from the Leverage Coin tranche to the Yield Coin tranche. The Yield Coin's NAV grows at the implied rate; the same amount is removed from the Leverage Coin's residual claim on the collateral pool. (When the implied rate is negative, i.e. Yield Coin trading above par, the transfer reverses.) The market price of the Yield Coin sets the rate, and the Latent Swap AMM clears that price continuously. As leverage demand rises, Yield Coin prices fall, the implied rate rises, and new senior capital is drawn in. As leverage demand falls, Yield Coin prices rise and the implied rate compresses. ## Who it's for Yield Coins are designed for users who want a senior claim on a specific Base Asset: * **Treasuries and stablecoin DAOs** seeking a fully collateralized, on-chain credit exposure with a market-priced rate; * **Fixed-income allocators** who want to soft-lock a yield by buying at a price; * **Onchain credit funds and structured product issuers** who use Yield Coins as a fungible building block for downstream products. Lenders who prefer diversified senior exposure across multiple Covenant Markets can hold the **Covenant sUSDz Yield Fund** receipt token (`$sUSDz`) instead. The sUSDz Yield Fund holds a portfolio of USD-quoted Yield Coins across markets and is redeemable at NAV. ## Risk profile Yield Coins have first call on the collateral in a Covenant Market. Junior holders (Leverage Coin) absorb losses first; senior holders are protected up to the depth of the junior buffer. There are no per-position liquidations and no liquidation cliffs. Risk is repriced continuously by the Latent Swap AMM rather than enforced through forced unwinds: as junior capital thins, leverage becomes progressively more expensive, drawing in new junior capital before the senior buffer is exhausted. A Yield Coin is exposed to the same Base Asset whose price oracle defines the market. If Base Asset NAV falls below Yield Coin NAV outstanding, senior holders take on residual price exposure to the Base Asset. ## Key properties * **Fungible ERC‑20.** Composable across DeFi venues. Per-market, not pooled across collateral assets. * **Permissionless mint and redeem.** Yield Coins can be minted by depositing the Base Asset, swapped into via the Latent Swap AMM, and redeemed back to the Base Asset at any time. * **Market-priced rate.** Yield is set by the AMM price of the Yield Coin. Buying at a price soft-locks the implied rate as the realized return. * **Senior in the waterfall.** First call on Base Asset collateral, ahead of Leverage Coin holders. * **Diversified exposure available.** Hold individual market Yield Coins for concentrated exposure, or `$sUSDz` for diversified exposure across markets. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.covenant.finance/covenant-intro/yield-coin.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.