> For the complete documentation index, see [llms.txt](https://docs.theo.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.theo.xyz/products/thbill/how-thbill-generates-yield.md).

# How thBILL generates yield

The mechanics behind thBILL's yield

thBILL earns the short-term US Treasury rate. The stablecoins used to mint it are subscribed into two regulated money market funds that hold Treasury bills, Treasury-backed repurchase agreements, and cash. The interest those funds earn raises their net asset value, and that rise is passed through to thBILL as a higher redemption value per token.

There is no trading strategy, no leverage, and no hedge. The yield is the yield of the underlying securities, less fees.

### What happens to $100

**$100 of USDC or USDT buys thBILL at the current price.** If one thBILL is worth 1.036858 USDC, $100 buys about 96.45 thBILL. The token count is fixed at that point and does not change while it is held.

**The $100 is subscribed into the underlying funds.** thBILL is backed by units of Wellington ULTRA and Fidelity FILQ. Both are AAAf rated, and both hold their assets with a bank custodian: Standard Chartered for ULTRA, J.P. Morgan for FILQ.

**The funds hold short-duration government paper.** A Treasury bill is bought at a discount and pays face value at maturity, typically within a few weeks to a few months. A repurchase agreement lends cash overnight against Treasury collateral and earns interest on it. As bills mature and repos roll, the fund's net asset value rises by the interest earned.

**The rise in fund value raises the value of thBILL.** Each thBILL is a claim on a fixed share of the pool, so when the pool is worth more, each token redeems for more.

***

### Where the yield comes from

| Source                         | What it is                                                                                    | Held by     |
| ------------------------------ | --------------------------------------------------------------------------------------------- | ----------- |
| Treasury bills                 | Short-dated US government debt bought below face value. The discount accretes to par.         | ULTRA, FILQ |
| Treasury repurchase agreements | Overnight or short-term cash loans secured by Treasury collateral. Pay a repo rate.           | ULTRA, FILQ |
| Asset-backed commercial paper  | Short-term corporate paper secured by receivables. Pays a small spread over government paper. | FILQ only   |
| Cash and deposits              | Uninvested balances held at the custodian bank.                                               | ULTRA, FILQ |

The return on all of these tracks the Federal Reserve's policy rate closely, because the instruments mature within weeks and reprice as rates move. When rates rise, thBILL's yield rises within a few weeks. When rates fall, it falls on the same lag. The fund fact sheets on the ULTRA and FILQ pages list the expected return as the relevant market rate less fees.

***

### How the yield reaches the token

thBILL is an accumulating token, not a rebasing one. A holder's balance never changes on its own. What changes is the amount of USDC that each thBILL can be redeemed for.

At launch, one thBILL was worth 1.000000 USDC. On September 2, 2026, one thBILL was worth 1.036858 USDC. A holder who minted at launch and did nothing has the same number of tokens and 3.69% more redeemable value.

The current price is readable from the contract at any time:

```bash
cast call 0x5FA487BCa6158c64046B2813623e20755091DA0b 'convertToAssets(uint256)(uint256)' 1000000 \
  --rpc-url https://ethereum-rpc.publicnode.com

# Returns the USDC value of one thBILL, in 6-decimal units. 1036858 means 1.036858 USDC.
```

The price updates when the underlying funds strike their daily net asset value, which happens on fund business days. Between strikes the price is flat. The interest earned over a weekend or holiday arrives in the next strike, so the price steps up rather than climbing continuously, and the step after a weekend is larger than the step after a weekday.

Because the price only moves with fund NAV, it does not move with market sentiment or trading activity. Buying or selling thBILL on a secondary market at a price other than `convertToAssets` is a decision about liquidity, not about what the token is worth at redemption.

***

### Why the token model matters

Accumulating tokens work in places rebasing tokens do not. A lending market that takes thBILL as collateral reads a stable balance and a rising price. An AMM pool holds a fixed token count. A wallet shows the same number every day. Yield shows up when the holder redeems or sells, not as a balance that drifts.

The same property means thBILL's yield is not visible from `balanceOf`. Anyone tracking the return of a position needs to sample `convertToAssets` at two points in time and compare. Most portfolio trackers and yield aggregators already do this for ERC-4626 style tokens.

***

### What can change the yield

**Rates.** The dominant driver. thBILL follows the front end of the US Treasury curve with a lag of a few weeks.

**Fees.** Fund management fees and Theo's fee are deducted before the NAV is struck. The yield holders see is net of both.

**Fund composition.** ULTRA holds Treasuries, Treasury repo, and cash. FILQ also holds asset-backed commercial paper, which pays a small spread over government paper and carries credit exposure that Treasury-only holdings do not. The mix between the two funds shifts the blended yield and the blended risk.

**Allocation between funds.** The split between ULTRA and FILQ is managed by Theo and is not fixed. It moves with capacity, settlement timing, and rate differences between the two.

thBILL holders have no claim on the underlying fund units or the securities inside them. Redemption settles in USDC or USDT at the current price, T+1. See Mint & redeem for eligibility and settlement.