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involves the difference in price between the on-the-run and the most recent off-the-run instrument: for long tenors, these are virtually the same instrument, and in any event, an on-the-run instrument becomes off-the-run upon the issue of a newer instrument. Thus, if the basis (difference in price)
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between an on-the-run and most recent off-the-run instrument becomes large, one may buy the off-the-run and sell the on-the-run in anticipation of the basis shrinking. This trade, for 30-year treasuries, is notable for having been practiced by
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security or contract is the most recently issued, and hence most liquid, of a periodically issued security. On the run, securities are generally more liquid and trade at a premium to other securities. Other, older issues are referred to as
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have periodic auctions; the treasury of a given tenor, say 30 years, which has most recently been auctioned is the on-the-run security, while all older treasuries of that tenor are off-the-run.
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When a new security is issued, becoming the new on-the-run security, buying the new contract and selling the old one is called
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is the on-the-run security; it thus has remaining maturity of between 4 years, 9 months and 5 years.
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securities, and trade at a discount to on the run securities.
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Most recently issued of a periodically issued security
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