> For the complete documentation index, see [llms.txt](https://docs.lendsprotocol.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.lendsprotocol.com/earn-with-lends/leusd-psm-and-morpho-vault.md). # leUSD, PSM & Morpho Vault leUSD is the stable asset used throughout LENDS. You can borrow it against supported tokenized stocks, convert USDG into it through the Peg Stability Module, repay debt with it, or stake it for sleUSD. ## What Backs leUSD leUSD has two issuance paths: | Issuance path | Backing | | ---------------------- | -------------------------------------------------------- | | Stock-backed borrowing | A borrower's overcollateralized tokenized-stock position | | PSM conversion | USDG reserves deposited into the protocol | Every leUSD is the same token regardless of how it was created. The protocol separately accounts for borrower debt and PSM-backed supply so that each backing source remains visible. ## Converting USDG to leUSD The PSM is designed to convert at a **1:1 rate with no protocol swap fee**: ``` 1 USDG in = 1 leUSD out ``` To convert: 1. Open **Convert leUSD** on the Dashboard. 2. Select **USDG to leUSD**. 3. Enter an amount within your USDG balance and the available PSM cap. 4. Approve USDG and confirm. Your USDG becomes part of the PSM reserves and the matching leUSD is minted to your wallet. ## Redeeming leUSD for USDG Eligible PSM-backed supply can be redeemed in the other direction: ``` 1 leUSD in = 1 USDG out ``` To redeem: 1. Open **Convert leUSD**. 2. Select **leUSD to USDG**. 3. Review the redeemable amount displayed by the app. 4. Approve leUSD if required and confirm. The submitted leUSD is burned and the corresponding USDG is transferred to your wallet. A 1:1 target does not mean unlimited instant liquidity. Redemptions require enough idle USDG in the PSM. Part of the PSM's USDG can be deployed into an external USDG lending vault on Morpho. Those reserves still contribute to protocol backing, but they are not idle in the PSM at that moment and may need a short cooldown for direct redemption. ## Morpho Vault Idle PSM reserves can earn lending yield. The reserve strategy targets a split in which most USDG is deployed and a smaller portion remains available for immediate redemptions. The configured target is 90% deployed and 10% idle. Only yield above the USDG principal backing PSM liabilities is treated as revenue. Principal remains reserved for backing and redemption. Realized surplus enters the same solvency-first revenue waterfall as other protocol income. You do not deposit into the external vault yourself when using LENDS Protocol. Your exposure is indirect through leUSD and the PSM. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.lendsprotocol.com/earn-with-lends/leusd-psm-and-morpho-vault.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.