I should add another very important liquidity proxy : net order flow of repo volumes. There is a strong negative relationship with the specialness premium, due to need to hedge the "winner curse" (over attribution of bonds at auction) by short selling /"reverse in" the bonds.
While the on the run / off the run spread is relevant to measure the liquidity of the repo market in USA, it's far less useful in europe because several tranches of security can be auctioned progressively. Hence the specialness (liquidity) is shown by bid ask / RV of the bond 👌
9:05 AM · Oct 4, 2021