stablecoin inflows lower 3M Treasury bill yields, while outflows raise yields by a larger amount

stablecoin inflows lower 3M Treasury bill yields, while outflows raise yields by a larger amount LP-IV estimates: ⏩ $3.5B inflows lower yields by ≈3 bp ⏪ $3.5B outflows raise the yields by ≈8 bp inflow = mint outflow = redemption/burn

this is because a stablecoin mint/creation on-chain is the proxy for a T-bill purchase by the company issuing that stablecoin (e.g. Circle, Tether) so stablecoin inflows proxy T-bill purchases, which raises their price and lowers the yield

stablecoin outflows proxy T-bill sales or reduced rolling redemption/burn requires the stablecoin issuer to sell NOW, so large volumes means dealers/market makers will require a yield concession to warehouse those T-bills, as they are subject to balance sheet constraints

essentially many T-bill sales flood the market at once, so their price falls, thus causing a yield increase selling T-bills is more urgent than buying - the stablecoin issuer cannot split it across auctions & dealers as easily, so the market yield change is larger on outflows