Earns APY from lending out FRAX to DeFi platforms
Decollateralize - Mints FRAX into money markets. The CR does not lower by the amount of minted FRAX directly since all borrowed FRAX are overcollateralized.
Market operations - Accrues interest revenue from borrowers.
Recollateralize - Withdraws minted FRAX from money markets.
FXS1559 - Daily interest payments accrued over the CR. (currently in development)
The AMO can increase or decrease the interest rate on borrowing FRAX by minting more FRAX (lower rates) or removing FRAX and burning it (increase rates). This is a powerful economic lever since it changes the cost of borrowing FRAX on all lenders. This permeates all markets since the AMO can mint and remove FRAX to target a specific rate. This also effectively makes the cost of shorting FRAX more or less expensive depending on which direction the protocol wishes to target.
Additionally, the fractional-algorithmic design of the protocol allows for unmatched borrowing rates compared to other stablecoins. Because the Frax Protocol can mint FRAX stablecoins at will until the market responds with pricing FRAX at $.99 and recollateralizing the protocol, this means that money creation costs are minimal compared to other protocols. This creates unmatched, best-in-class rates for lending if the protocol decides to outcompete all other stablecoin rates. Thus, the AMO strategy can optimize for conditions for when to lower the rates (and also bring them under other stablecoin rates) and also increase rates in opposing conditions. Ironically, the lending rate on their own token is something other stablecoin projects have difficulty controlling. Frax has total control over this property through this AMO.