Morpho APY explained: native, rewards and net APY

A Morpho vault usually shows one headline APY, but that number is built from several parts and it changes all the time. This guide separates the parts, shows how fees come off, and explains why an average over the past week or month tells you more than the number on screen right now.

Native APY: interest paid by borrowers

The native APY is the interest a vault earns from the markets it lends into. It is the weighted average of those markets' supply rates, according to how much the vault has in each, before any fees. Idle cash earns nothing, so it pulls the average down.

This is the core of the yield. It is paid in the vault's own asset, for example USDC, by real borrowers, and it follows the interest rate model of each market.

Rewards APR: extra tokens on top

Some vaults and markets run incentive programs that pay extra tokens to lenders, such as MORPHO or a token issuer's own token. They can be paid directly to a vault's depositors, or earned by the markets a vault lends into and passed on to its depositors. Morpho distributes rewards through a service called Merkl, and you have to claim them.

Rewards are different from native yield in ways that matter:

• They are paid in another token. Their value in dollars moves with that token's price.
• They are temporary. Programs have an end date, and when one ends the headline number falls.
• They must be claimed. For campaigns run by Morpho governance, rewards left unclaimed are reallocated six months after the campaign ends, according to Morpho's documentation.

Rewards are usually quoted as an APR, a simple rate, because they do not compound on their own.

Net APY: what is left after fees

Morpho's documentation puts the parts together like this:

net APY = native APY x (1 - performance fee) + underlying token yield + rewards APR - management fee

• The performance fee is the curator's share of the interest. It applies only to the native part.
• The management fee exists only on Vault V2 and is charged on total assets.
• The underlying token yield only applies when the vault's asset earns yield by itself, for example a vault that lends out a yield-bearing token. For a plain USDC vault it is zero.

An illustrative example:

Without the rewards, the same vault would pay 4.50%. When you compare vaults, check whether each number includes rewards and whether it is before or after fees. The fee limits are covered in how Morpho vaults work.

Why a vault's APY moves

• Utilization changes. Every borrow, repayment, deposit or withdrawal in the underlying markets moves their rates.
• The rate curve shifts. Morpho's interest rate model keeps moving each market's rates up or down over days when utilization stays away from 90%.
• The allocator moves money. Shifting funds between markets changes the mix, and so the average.
• Large deposits dilute the rate. New money lowers utilization in the markets it enters, which lowers their rates until borrowers take more. Money waiting idle earns nothing.
• Large withdrawals do the opposite. They raise utilization and rates, sometimes sharply.
• Rewards start and stop. A program ending can cut the headline number overnight.
• Fees change. A V1 vault owner can change the performance fee at once. On V2, fee changes wait out whatever timelock the curator has set.

APR vs APY

Morpho's contracts work with a rate per second, and interest compounds continuously. APR is that rate written as a simple yearly figure. APY adds the effect of interest earning interest over a year:

APY = e ^ APR - 1

Both are written as decimals in the formula, so 5% goes in as 0.05.

At everyday rates the gap is small. It grows quickly at high rates, so always compare APY with APY, or APR with APR.

Why 7-day and 30-day averages are a better guide

The live APY is a snapshot of one moment. It can jump for an hour after a big withdrawal, or sit high on the day a new reward program starts. Neither tells you much about what you would actually earn.

A realized average looks backward instead. It measures how much the vault's share price actually grew over a period, such as 7 or 30 days, and turns that into a yearly rate. Because it uses the share price, it already has the curator's fees taken out, and it catches every spike and dip along the way. Morpho's own data service calculates vault APY averages this way, from share price growth, after fees and without rewards.

• A 7-day average reflects recent conditions while smoothing out single-day spikes.
• A 30-day average is steadier and shows whether a rate is typical or a short burst.
• A big gap between the live rate and the averages is a sign that something just changed.

You can compare current and average yields on the yields page and the vaults page, and turn a rate into money over time with the vault earnings calculator.