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Maturity

Overview​

Positions on Tenor are originated with fixed terms (e.g. 2 weeks, 1 month, 3 months). When a position reaches the end of its term, it has reached its maturity. By default, Tenor enables auto-renewal, which helps prevent soft liquidation by automatically extending the position into a market with a later maturity date. The auto-renewal feature is powered by an immutable and permissionless smart contract enabling third parties (e.g. a lender) to renew the position at the best available market rate.

What Happens at Maturity?​

When a position reaches its maturity date, the borrowed amount plus the interest becomes due. If it has not been fully repaid by that time, the outcome depends on the auto-renewal setting:

  • Auto-renewal enabled: The position is automatically rolled forward into a 1 month longer dated fixed-term market at the best available rate. The funds borrowed in the longer dated market are used to close the existing position in the maturing market and the collateral is transferred from one maturity to the next. If the liquidity is insufficient to renew the position at a fixed rate in the longer dated term, the position will be renewed using an open term market.
    • Fixed Term: The auto-renewal contract runs an auction to source the best rate available for the user. The auto-renewal takes into account the parameters set by the user (maximum renewal rate, maximum duration)
    • Open Term: If the liquidity is insufficient to renew the position at a fixed rate, the position is rolled to an open term market at a variable rate.
  • Auto-renewal disabled: If the position is not closed at maturity, any third party can close the position by initiating a soft liquidation of the user’s collateral on Morpho v2. This means a portion (or all) of the collateral is sold to repay the outstanding principal and interest. The goal is to ensure lenders are repaid in full without requiring manual intervention. Tenor offers its users smart contracts enabling to programatically renew the position at the best market rate available just before maturity according to user set parameters.

Tenor’s Auto-Renewal Feature​

Auto-renewal is powered by a custom Tenor smart contract. By default, it is enabled for all positions initiated through the platform. Borrowers retain the flexibility to disable it at any time.

Users can set their preferred parameters:

  • Maximum fixed rate to be renewed at
  • Maximum duration of the term
  • Enable open term renewals

Learn more about how auto-renewal works here.