Franklin Templeton’s tokenized high-yield bond ETF gets yield trading on Pendle

Franklin Templeton’s tokenized high yield bond ETF now has a market on Pendle through FLHYon, an Ondo-issued token tracking its FLHY fund. The market has a 2026 maturity, allowing traders to trade future income from the asset separately—but holding the token does not mean owning ETF shares directly.

Key takeaways

• Ondo issues FLHYon and holds its backing assets.
• Pendle hosts yield trading, not token issuance or custody.
• FLHYon’s on-chain assets totaled roughly $497,000 in October 2026.

FLHYon gives holders economic exposure to Franklin Templeton’s high yield corporate bond ETF, including dividend reinvestments. The token operates primarily on Ethereum and also serves as collateral on Morpho.

How the tokenized high yield bond ETF is backed

Ondo Global Markets (BVI) Limited issues FLHYon, while Ondo holds the underlying assets. The structure is designed to maintain 1:1 backing, with cash in transit supporting liquidity.

The distinction between exposure and ownership is central to the product: holders participate in the ETF’s economic performance, including reinvested dividends, but do not directly own FLHY shares. Pendle has no direct role in this issuance or backing structure.

Pendle’s market and Ethereum trading mechanics

Pendle provides a yield-tokenization market for FLHYon with a maturity in 2026. Its role is to let traders buy and sell an asset’s future income stream with a defined end date, rather than to issue the token or hold its backing assets.

For this tokenized high yield bond product, minting and redemption operate 24/5, reflecting conventional market hours. Peer-to-peer transfers operate 24/7.

As of June 2026, lending platform Morpho accepted FLHYon as collateral. It uses Chainlink oracles to supply pricing data.

Partnership scope and October token metrics

Franklin Templeton and Ondo established their partnership in March 2026 to tokenize five ETFs: FLHY, FFOG, FLQL, FGDL and INCE. The offerings target US and non-US investors through an offshore issuing entity.

The report places FLHYon’s launch window between mid-2025 and March 2026, separate from the Pendle market development.

In early to mid-October 2026, FLHYon’s net asset value was approximately $24.17 per token, with about 20,558 tokens circulating. Its on-chain assets totaled approximately $497,000 in October 2026.

Credit, protocol and liquidity risks

FLHYon carries the credit risk of its underlying high yield bonds, issuer risk associated with Ondo, oracle price-feed risk and smart contract risk across the protocols it uses. Token holders receive economic exposure rather than direct ETF-share ownership.

The report also identifies liquidity constraints tied to the token’s small on-chain footprint. Thin markets can make large trades costly on yield venues such as Pendle.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.