A swap which allows one of the counterparties to lock in the spread between two different points on a particular yield curve. The counterparty willing to lock in the spread can trigger it at any time during a preset trigger or lock-in period. A trigger swap pays a fixed-rate below the market rate. And if rates exceed a certain trigger level, the fixed-rate payer will pay a floating rate minus a specific spread (basis points) determined by the market floating rate prevailing at the time.

This swap is mainly used to speculate on future curve movements or to benefit from a favorable curve setting when the absolute level of the underlying market makes entering into a swap a lackluster or a scathing choice.

It is also called a subsidized swap, a curve-lock swap or a barrier swap.