Pendle oracle triggers $36 million in liquidations on Morpho

On August 25, 2026, a minor 3% price drop in Pendle's PT-reUSD collateral token triggered $36.4 million in automated liquidations on the Morpho lending platform. The liquidations cleared out highly leveraged, looped borrowing positions within 14 minutes. While lenders suffered zero bad debt and the oracle functioned as designed, Re Protocol is investigating potential price manipulation by a wallet that coordinated yield token trades to force the liquidations.

Pendle oracle liquidations on Morpho

• ▪A roughly 3% decline in the price of Pendle's PT-reUSD token triggered approximately $36.4 million in liquidations on the Morpho lending platform on August 25, 2026.
• ▪The liquidations on Morpho on August 25, 2026, resulted in zero bad debt, leaving lenders in Steakhouse Financial's vaults and the underlying reUSD asset unaffected.
• ▪The liquidations on Morpho on August 25, 2026, occurred across 33 liquidation events between 04:37:47 and 04:51:23 UTC, closing out leveraged positions in about 14 minutes.

Looped yield strategy mechanics

• ▪Borrowers on Morpho used PT-reUSD as collateral to borrow USDC, buy more PT-reUSD, and repeat the loop, leaving their leveraged positions with less than a 3% buffer against liquidation.
• ▪The Pendle reUSD pool maturing on December 10 held $8.97 million of liquidity, while the corresponding Morpho market held $67.5 million of collateral against $52.2 million of borrows.

PT-reUSD price manipulation investigation

• ▪Re Protocol, the issuer of reUSD, announced it is investigating whether the PT-reUSD market price was intentionally manipulated on August 25, 2026.
• ▪Onchain analyst 0scar stated that the liquidator and the YT-reUSD buyer were the same entity, as the liquidator paid for the buyer's gas multiple times, yielding at least $360,000 in gains.
• ▪A single wallet bought a large amount of YT-reUSD to drive the implied annual yield to 20% and then sold the position, pushing the PT-reUSD price down by about 3%.

Oracle configuration rationale

• ▪Pendle stated that the oracle feed was configured correctly and functioned as designed, noting that positions with health factors below 1.03 crossed the liquidation threshold when the market price fell.
• ▪The Morpho oracle configured by Steakhouse Financial referenced the lower of two prices: the PT-reUSD 15-minute average market price on Pendle, or a fixed curve rising to $1 at maturity.

Liquidity mismatch warnings

• ▪Steakhouse Financial noted in a June 2025 forum post that market-based oracles are closer to the true collateral price but are often thinly traded and susceptible to manipulation.
• ▪On August 17, 2026, a user named SrAugust warned on the Morpho governance forum about a size mismatch, noting $55.8 million borrowed against only $7.3 million in liquid assets.

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