Off-the-Run Treasuries: Value & Strategy for Australian Investors (2026)

In the world of government bonds, 'on-the-run' Treasuries are the latest issues of a given maturity (like the newest 10-year Australian Commonwealth Government Bond). 'Off-the-run' Treasuries are older issues of the same maturity that have been replaced by newer ones at auction. While on-the-run securities tend to dominate headlines and trading volumes, off-the-run bonds make up the majority of the outstanding government bond market.

• Liquidity: On-the-run Treasuries are highly liquid, often used as benchmarks and traded by major institutions.

• Off-the-run: These are still government-guaranteed, but usually trade at a slight discount due to lower liquidity.

• Yield Advantage: In 2026, many off-the-run Treasuries offer higher yields than their on-the-run equivalents—an important point for yield-focused Australians.

Why does this matter in Australia? With the RBA holding rates at 4.35% as of May 2026 and no immediate cuts expected, fixed income is back in the spotlight. Savvy investors are looking for ways to boost returns without taking on excessive risk, and off-the-run Treasuries fit the bill.

One of the most compelling reasons to consider off-the-run Treasuries is their yield premium. Because these bonds are less liquid, investors often demand a higher yield to compensate for the relative difficulty in buying and selling. In the current Australian market, this premium has become more pronounced due to:

• Increased issuance: The Australian Office of Financial Management (AOFM) has continued to issue new bonds to support government spending, expanding the universe of off-the-run securities.

• Risk-off sentiment: Geopolitical uncertainty and global inflation have driven institutions to hoard liquid assets, leaving off-the-run bonds with fewer buyers and better yields.

• ETF demand: Large fixed income ETFs tend to focus on on-the-run bonds, which can further depress prices (and boost yields) on off-the-run issues.

For example, in early 2026, certain off-the-run 10-year Commonwealth Government Bonds were trading at yields up to 0.10% higher than their on-the-run counterparts—a meaningful pickup for long-term investors.

Of course, higher yield does not come without trade-offs. The main risk for off-the-run Treasuries is liquidity. During periods of market stress, these bonds can be harder to sell quickly and may experience wider bid-ask spreads. However, for buy-and-hold investors or those willing to accept modest liquidity constraints, these drawbacks are often outweighed by the yield benefits.

• Liquidity risk: Off-the-run bonds may not be suitable for investors who need to sell quickly in volatile markets.

• Price transparency: With fewer trades, pricing may be less transparent, requiring more due diligence.

• Credit risk: Still minimal, as these are government-backed securities.

Strategically, off-the-run Treasuries can play several roles in an Australian fixed income portfolio:

• Yield enhancement: Add extra basis points without moving down the credit curve.

• Diversification: Reduce concentration in benchmark issues and ETFs.

• Barbell strategies: Combine off-the-run bonds with cash or short-term notes for a more resilient yield profile.

Accessing off-the-run bonds is easier than many think. Large brokers and some online trading platforms offer a range of government and semi-government bonds, including off-the-run issues. Investors can also access these securities through managed funds, bond ladders, or bespoke portfolios constructed with the help of a financial adviser. In 2026, as more Australians seek out defensive assets, these options are expanding.

Keep in mind that transaction costs can be slightly higher, and it pays to compare quotes from multiple sources to ensure the yield pickup is worth it.

Off-the-run Treasuries are a powerful tool for Australian investors seeking better yield, diversification, and value in 2026’s dynamic bond market. While they may lack the headline appeal of on-the-run bonds, their advantages are increasingly hard to ignore. With the right strategy and a focus on long-term outcomes, off-the-run Treasuries could be the quiet achievers in your portfolio this year.