A note or bond whose coupons are based on the difference between two floating-rate indexes. Typically, these notes or bonds pay an above-market fixed-rate coupon for a specific period of time. Thereafter, these instruments will pay either the above-market fixed coupon or nothing, depending on whether the difference remains above a preset level or not. For example, a bond may be the following coupons:
| Years 1-3 | 5% |
| Years 3-10 | 5%, accruing each day the difference is non-negative; 0% otherwise |
| Curve | 10-year CMS – 2-year CMS |
This note or bond is often callable, where the issuer has the right to recall them after a specific number of years and every regular period thereafter (quarterly, semiannually, etc)
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