On-The-Run Treasury Yield Curve
Categories: Bonds
On-the-run Treasuries are just that: the most recently sold group of U.S. Treasury bonds. Once they’re not the newest group sold anymore, they retire to the “off-the-run Treasury" status.
On-the-run Treasuries are of great interest to short-term traders, since they’re more liquid than off-the-run Treasuries (on the flip-side, you’ll find long-term investors in the cheaper, off-the-run Treasury market).
Where do these short traders go for on-the-run Treasury info? The yield curve.
The on-the-run Treasury yield curve shows the current yields graphed against their maturities, for the most recently sold group of U.S. Treasury bonds. Compared to the relatively stable off-the-run Treasury yield curve, land of the long-term investors, the on-the-run Treasury yield curve is a little less accurate. All the short-term traders looking to hedge risk or earn a buck from short selling might temporarily inflate the prices of on-the-run Treasuries, while they’re still hot-ticket items. Once the newest batch of Treasury bonds is released, those used-to-be on-the-run bonds become off-the-run bonds, and get much less action and attention...like an aging Hollywood star.
Besides being of interest to short-term traders, the on-the-run Treasury yield curve is the main benchmark used for fixed-income security pricing, since it reflects the current U.S. bond market.
See: On-The-Run Treasuries.