What Is a Principal Token (PT)? A Beginner’s Guide
What is a Principal Token (PT)?
A Principal Token (PT) is a token representing the principal of a yield-bearing deposit, which redeems 1:1 for the underlying asset at maturity. Because its yield has been stripped away into a separate Yield Token, a PT trades at a discount before maturity — and that discount is the fixed yield you lock in. A PT is effectively an on-chain zero-coupon bond.
Key takeaways
- A PT is the principal half of a yield-tokenized position.
- It redeems 1:1 for the underlying at maturity — like a zero-coupon bond.
- It trades below par beforehand; the discount is your fixed yield.
- Buy PT + hold to maturity = lock a known return, regardless of rate moves.
- On Stellar, Spield mints PTs backed by real Blend yield.
How does a Principal Token work?
A Principal Token works by separating the principal from the yield of a deposit. When you tokenize a yield-bearing position, you receive a PT (the principal claim) and a Yield Token (YT) (the yield claim). The PT can be redeemed for one full unit of the underlying once the position reaches maturity.
Before maturity, since all the yield has moved to the YT, the PT is worth less than the underlying — so it trades at a discount. Buy 1 USDC of principal for 0.95 today, redeem for 1.00 at maturity, and the 0.05 is your locked-in return.
Why is a PT like a zero-coupon bond?
A PT is like a zero-coupon bond because it pays no interest along the way and instead returns full face value at a fixed date. In both cases you buy at a discount and your entire return is the gap between the discounted price and the redemption value — a clean, predictable fixed yield.
How do you use a PT to lock a fixed rate?
Buy the PT at a discount
Purchase the PT below its par value on the market, or mint it by depositing the underlying.
Hold to maturity
The PT price converges toward par as maturity approaches; the fixed return you saw at purchase is locked in.
Redeem 1:1
At maturity, redeem each PT for one unit of the underlying asset — principal plus your locked yield.
Can I sell a Principal Token before maturity?
Yes. PTs are freely tradable, so you can sell before maturity on the market. Its price moves with interest rates like any bond, so you may realize a gain or loss depending on rate changes since you bought.
Is a Principal Token safe?
Held to maturity, a PT returns its principal plus the locked-in discount, so its main exposures are smart-contract risk and pre-maturity price movement if you sell early. It is the conservative, fixed-income side of yield tokenization.
Where can I get a Principal Token on Stellar?
On Spield, the fixed-income layer for Stellar. Depositing USDC mints a PT and a YT, and you can also buy PTs at a discount on the Spield market to lock a fixed yield.