> For the complete documentation index, see [llms.txt](https://docs.rate-x.io/ratex/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.rate-x.io/ratex/ratex-protocol/basic-concepts-of-yield-trading/yield-distribution.md).

# Yield Distribution

## Mint of YT and ST:

YT and ST are minted based on collateral deposited by the issuer, who borrows against the collateral from the protocol. This ensures that the issuance is backed by sufficient assets, maintaining the integrity and value of YT and ST.

## Yield Calculation for ST and YT

In this section, we will explain how the yield for ST and YT is generated and calculated, as well as the sources of the yield.

**Yield Calculation:**

The yield received by an ST over a certain period is calculated based on two main parameters:

1\. **Actual Rate of Return:** This refers to the actual APY/APR data of an underlying YBA over a given period. We use this data to calculate the amount of yield that should be distributed to the holders of ST and YT.

2\. **Yield Calculation Time Interval:** This is the period over which the yield is accumulated and calculated.

At the end of each time interval, RateX rebalances the number of YTs and STs in the AMM to align with the yield payments made to ST and YT holders. This update may cause a brief suspension of trading in the corresponding contract to ensure accurate adjustments.

**Yield Distribution:**

After the yield is calculated, issuers of YTs and STs distribute the yield to holders of YTs and STs. The process of issue YTs and STs is based on 

For example:

Before Yield Distribution:

* YT Holders: A YT
* ST Holders: B ST

If the Rate of return (not annualized) is 0.1 %, after Yield Distribution, :

* YT Holders: *A* YT + 0.1 %×A ST
* ST Holders: B × *(1 + 0.1%)* ST

For the issuers of YT and ST, the yield distribution process works in reverse, meaning their liabilities increase in proportion to the accrued yield, mirroring the increase in holdings for the holders.\
From the above results, it can be seen that when holders possess the same amount of YT and ST, the yields they obtain are identical. By holding YT, traders have the potential to considerably elevate their capital efficiency and generate augmented returns. 


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