On the Run Treasury Security

On the run Treasury definition


The term on the run Treasury refers to the most recently issued U.S. Treasury note or bond of each specific type and maturity. Market analysis is based on these on the run Treasury notes and bonds; in most cases, on the run Treasuries are the most liquid and easiest to dispose of and obtain on the open market. Because on the run Treasury notes and bonds are the most traded securities of their specific type and maturity, they are used to assess overall market conditions and to generate forward market projections and trends.

Types of on the run Treasury securities
 

Because U.S. Treasury securities are sold in a wide array of types and maturities, on the run Treasury securities are available in that same wide range of selections. Treasury bills, or T-bills, are one of the most commonly bought and sold types and are available in three-month, six-month, and twelve-month maturities. Treasury notes and bonds comprise another major category and feature maturity periods of more than one year. Treasury notes are available in maturities from one to ten years, while Treasury bonds are sold in maturity periods of over ten years; this marks a major distinction between the two types of securities, which are otherwise very similar. Treasury strips are also known as zero-coupon bonds and are sold at below the face value; the full face value is paid out at maturity, typically within one year. Finally, Treasury inflation protection securities offer a variable interest rate that maintains a fixed percentage, typically two or three percent, over and above the current inflation rate. All of these Treasury securities are issued regularly; the most recently issued version of each is known as the on the run Treasury security for that type.

On the run Treasury yields


The overall U.S. Treasury yield curve is determined based upon on the run Treasury yields; this benchmark of performance is the basis for pricing of fixed-income securities including Treasury bonds. As a result, on the run Treasury yields have a major effect on overall economic conditions throughout the U.S. and often dictate future market trends and performance to some degree. Due to the extreme liquidity of these investments, on the run Treasury securities occasionally experience special repo rates or, in financial parlance, go “on special.” This typically occurs when investors bid up the price of certain on the run Treasury securities as part of an overall hedging strategy. On the run Treasury notes and bonds typically are slightly more expensive than previous issues due to their higher liquidity and greater demand for the newer issues over older versions of the same securities.
Tim Ord
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