On-The-Run Treasuries
Categories: Bonds
“I’m free! I’m free!” says the crowd of bonds just sold, straight from the U.S. Treasury. These U.S. Treasury bonds—the most recent batch sold, hot off the press—are “on-the-run Treasuries.”
On-the-run Treasuries aren’t just hot in the media because they’re shiny and new. They’re the most traded Treasury securities because they’re the most liquid, far out from their maturity dates. Once on-the-run Treasuries get old—replaced by a newer batch of most-recently-sold Treasury bonds—they join the other group: “off-the-run Treasuries.”
On-the-run Treasury bonds are hot stuff for short-term traders looking for liquid bonds. Maybe they’re trying to hedge against risk, or they’re aiming to cash out on the spread between now and later. All this flurry makes on-the-run Treasuries more expensive than off-the-run Treasuries. Since off-the-run Treasuries are cheaper, this is where long-term investors are doing their bond shopping.