A wallet identified on-chain as 0x854e…690d spent roughly $320,000 on Pendle between 04:28 and 04:37 UTC on Aug. 25, executing 11 consecutive trades that converted SY-reUSD into more than 9.5 million YT-reUSD. That nine-minute sequence drove the implied annual yield for the PT-reUSD/YT-reUSD market above 20 percent and pulled the PT-reUSD price down approximately 3 percent — enough to detonate $36.4 million in Morpho liquidations without creating a single dollar of bad debt.
Pendle's yield-splitting mechanism divides any deposited yield-bearing asset into two components: a Principal Token, which represents the right to redeem the underlying principal at maturity, and a Yield Token, which captures the income stream until that date. The two move inversely. Aggressive YT buying spikes implied yield and simultaneously knocks PT price lower, and that inverse relationship is what turned one wallet's trade into dozens of forced closures on a separate protocol.
The PT-reUSD market on Pendle had a maturity date of Dec. 10, 2026. Before the trades landed, implied yields sat near 11 percent — attractive enough that borrowers on Morpho had loaded up, posting PT-reUSD as collateral. Loan-to-value ratios across those positions had climbed to roughly 91.5 percent ahead of the incident, leaving less than a 10 percent cushion before liquidation thresholds.
The oracle design amplified the effect. Pendle's PT-reUSD price feed takes the lower of two inputs: a 15-minute market average price and a benchmark derived from a fixed discount curve applying roughly a 6 percent annual discount through maturity. When 11 trades execute in under nine minutes in a thin market, that 15-minute rolling average moves fast. Both Pendle and vault curator Steakhouse Financial confirmed the oracle performed as designed — the 3 percent price drop was a real market move reflected by the feed, not a data error.
Morpho's liquidation engine responded automatically. Thirty-three liquidation events swept through 19 to 20 borrower positions. Collateral seized totaled over 38 million PT-reUSD. Liquidators repaid approximately $35.19 million in USDC debt and $960,000 in USDT debt. Every position held enough collateral to cover its outstanding loan, so the protocol ended the episode solvent.
Pendle launched a USDC vault on Morpho around Aug. 4, three weeks before the incident. That vault accumulated more than $15 million in deposits in short order, with the bulk of those funds flowing into PT-reUSD markets. Borrowers chasing the 11 percent implied yield posted PT-reUSD as collateral and levered up — standard fixed-yield carry trade mechanics. At 91.5 percent LTV, those positions needed only a modest adverse move to cross the liquidation line.
The structural issue is the combination of a thin PT market, a 15-minute oracle window, and LTV limits that left almost no room for volatility. PT markets on Pendle are inherently less liquid than the underlying asset — the yield-splitting process creates two instruments from one, and each has a smaller natural buyer base. When a single wallet moves $320,000 through that thinner leg in under 10 minutes, the price impact lands disproportionately on the oracle.
Steakhouse Financial curates the Morpho vault in question. Both Steakhouse and Pendle said the liquidations reflected normal protocol operation: collateral fell below the required threshold, and Morpho's engine cleared the debt. No exploit or manipulation was announced in connection with the event.
Converting SY-reUSD into YT-reUSD in rapid succession is a yield-long trade — the buyer profits if actual realized yield exceeds the implied yield locked in at purchase. Whether 0x854e…690d was executing a deliberate strategy knowing the collateral damage it would cause on Morpho, or simply running a yield trade without regard for downstream effects, is not established by on-chain data alone. No rules were broken under either protocol's design.
The episode adds a data point to the ongoing discussion around PT-collateral lending on Morpho. The 91.5 percent LTV ceiling on a thinly traded yield-split instrument with a 15-minute oracle window left the system exposed to exactly this kind of short, concentrated flow. Comparable PT-collateral markets on Morpho for other Pendle assets carry similar parameters, and the Dec. 10, 2026 maturity on PT-reUSD means the market remains active for months.
