Pendle's total value locked rose 43% quarter-over-quarter to $1.16 billion by September 30, according to the yield-trading protocol's quarterly performance update, marking its first quarterly gain since September 2025.
The growth came alongside a roughly 58% reduction in PENDLE token incentives, meaning the protocol expanded without relying on the same level of token emissions.
Real-world assets drive the quarter
Real-world asset (RWA) markets accounted for 82% of Pendle's TVL by the end of the quarter, according to the report. Tokenized dollars backed by RWAs added $395 million during the period and finished at $949 million.
The concentration is even sharper among Pendle's largest markets: RWA-backed tokenized dollars made up 85% of the protocol's top 50 markets.
Newer RWA issuers such as re.xyz and Agora posted strong growth, gaining ground previously held by dominant assets including Ethena.
Principal Tokens gain traction as collateral
Pendle's Principal Tokens (PTs) also expanded their role elsewhere in DeFi. Lenders more than doubled their acceptance of PTs as collateral, reaching about $497 million.
That increase was attributed to PT-reUSD listings on Morpho and new integrations on Aave.
Buybacks outpace emissions
On tokenomics, Pendle leaned more heavily on buybacks. The protocol repurchased 3.2 tokens for every one it distributed in incentives, up from 1.6 in the second quarter. Pendle directs 80% of retained fees toward these buybacks, making stakers the primary beneficiaries of the shift.
Not every metric improved. V2 revenue fell to $2 million as trading fees declined, though the update noted improved efficiency in fees collected from yield tokens.
A rebound from a two-year low
The quarter's gain follows a low base. Pendle's TVL had fallen to a two-year low of $812 million on June 30 before recovering during the third quarter.
What to watch in the fourth quarter
The immediate test comes next quarter. Approximately $1.06 billion, or about 91% of TVL as of September 30, is set to mature by December 17, including $236 million from re.xyz due on December 10.
For PENDLE holders, the buyback ratio is the key figure to track. Repurchasing 3.2 tokens per token emitted means buybacks are currently outpacing new supply from incentives. That ratio could weaken if fee income continues to slide as V2 revenue did this quarter, since buybacks are funded from retained fees.
The expanding use of PTs as collateral on Morpho and Aave could aid retention, giving holders a reason to roll into new maturities rather than exit.
