A financial derivative whose payoff depends on the spread (constant maturity swap spread) between two swap rates of different maturities (e.g., the 10-year swap rate minus the 2- year swap rate). This type of derivative is traded by investors who wish to take advantage of, or to hedge against, future changes in the slopes of specific parts of the yield curve. The most common CMS spread instruments are CMS spread notes/ bonds (steepener or flattener), CMS spread caps and floors, and CMS spread range accrual notes/ bonds.

There are other CMS spread derivatives that are not commonly traded—such as CMS spread call and put options on bonds, CMS spread digital options, and CMS spread swaptions—but are embedded in other financial instruments. This derivative is being increasingly used by insurance companies and pension funds in particular.