Interest Rate Dynamics

Recall that as more managers buy longZCB for a lending pool, more capital would be supplied to the lending pool by its parent vault. All else being equal, this would decrease the utilization rate and consequently lower the price of capital. Likewise, as more managers redeem longZCB for a lending pool, capital would be withdrawn to its parent vault. All else being equal, this would increase the utilization rate and the price of capital.