Consider the on$-$the$-$run$/$off$-$the$-$run Treasury trade popular among fixed income arbitrage hedge funds.

Which of the following statements is correct?

Question $4$ options:

Lower yields on off$-$the$-$run Treasury bonds reflect a liquidity premium.

Higher yields indicate lower prices of long$-$term bonds.

Fixed income arbitrage amounts to collecting nickels behind the steamroller.

Less liquid off$-$the$-$run Treasury bonds are easier to sell and convert to cash.