# On-the-Run

Source: https://www.yieldcurve.pro/learn/on-the-run

**On-the-run** Treasuries are the most recently auctioned securities at each standard maturity (2-year, 5-year, 10-year, etc.). They are the benchmark issues that define the yield curve and trade with the tightest bid-ask spreads and deepest liquidity.

Once a new issue is auctioned at the same maturity, the previous on-the-run becomes **off-the-run**. Off-the-run securities are identical in credit quality but trade at a small yield premium (the "liquidity premium") because they are less actively traded.

The on-the-run / off-the-run spread reflects pure liquidity demand:

- **Typical spread**: 2-10 bps, depending on market conditions
- **In crises**: the spread can widen dramatically as investors flee to the most liquid instruments

On-the-run Treasuries are important because:

- **Benchmark pricing**: the par yield curve is fitted primarily to on-the-run issues
- **Repo market**: on-the-run issues often trade "special" in the repo market, meaning they can be borrowed at below-market rates due to strong demand
- **Hedging**: derivatives desks and mortgage hedgers use on-the-run Treasuries as their primary hedge instruments
- **Index construction**: major bond indices reference on-the-run yields

The transition from on-the-run to off-the-run creates a predictable price dislocation that some relative value traders exploit.