A trade that involves treasury bonds in an attempt to skim the spread between newly issued on-the-run treasury bonds and other off-the-run long term bonds that were previously issued by the treasury, including those having a similar maturity. At certain times, investors prefer to hold newly-issued on-the-run treasury bonds (say with a maturity of 30 years), ignoring off-the-run bonds almost with a similar maturity (say 29 1/2 years).
Typically, newly issued bonds are more expensive than off-the-run bonds with slightly shorter maturities. Traders attempt to exploit the price difference, buying cheap bonds, and selling expensive ones. They wait till newly issued bonds age, their prices converge, and then unwind their positions, whereby pocketing the spread.
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