Off-the-run bonds accumulate quickly. There are hundreds of them across the curve, most held to maturity in insurance and pension portfolios, trading a fraction of the volume of the current benchmark.
They matter for two reasons. First, they yield more for essentially the same credit, which is free pickup for a buy-and-hold investor. Second, the on-the-run versus off-the-run spread widens when funding stress hits, because leveraged investors dump the illiquid leg first. That spread is a useful market-plumbing stress gauge.
Example: in calm markets the on-the-run 30-year trades 3 basis points through a comparable off-the-run. In a liquidity event the gap blows out to 20 basis points, wrecking relative-value trades that were short the rich bond and long the cheap one.
Related: on-the-run, treasury-bond, special-repo, liquidity, repo