On-the-Run
The most recently issued U.S. Treasury security of a given maturity, which serves as the benchmark and commands the highest liquidity.
What is On-the-Run?
On-the-run refers to the most recently auctioned U.S. Treasury security of a particular maturity—such as the 2-year, 5-year, 10-year, or 30-year. On-the-run Treasuries are the most actively traded and most liquid bonds in each maturity bucket, making them the primary benchmark securities used to price other fixed-income instruments. When a new Treasury is auctioned, the previous issue becomes 'off-the-run'—it continues to trade but at a slight yield premium (lower price) due to reduced liquidity. The yield spread between on-the-run and off-the-run Treasuries of the same maturity is called the on-the-run/off-the-run spread, which tends to widen during periods of market stress when investors prize liquidity.
Example
When the U.S. Treasury auctions a new 10-year note in February, it becomes the on-the-run 10-year Treasury. The previously issued 10-year note from November—despite being just 3 months older—becomes off-the-run and typically yields 1–5 basis points more than the new on-the-run issue. During the March 2020 COVID liquidity crisis, this spread widened to over 40 basis points as investors scrambled to sell anything but the most liquid securities.