In this episode, we break down the financial strategy of rolling a contract, a process where investors trade out of a current contract and immediately buy one with a longer maturity to maintain a position with constant maturity. We explore the primary motivations for this strategy, such as the need to target a specific timeline—like the five-year CDS rate—or the desire to hold on-the-run securities, which are generally more liquid than older, off-the-run counterparts.

Using US Treasuries as a key example, we explain how investors sell previous holdings to purchase newly auctioned securities. Finally, we discuss the market impact of these shifts, specifically index roll congestion, where traders execute strategies in advance of an index's published roll policy to anticipate  ...