The last couple of years saw a lot of institutions buy constant maturity swap steepener products - and get their fingers burnt. Unexpectedly flat euro and dollar interest rate curves mean that a lot of these products are now well underwater. The payout on these products was based on the spread between two different CMS rates - flat curves mean that this spread is far tighter, and so the coupon is lower.
Naturally, the holders of CMS steepeners are deeply unhappy. But in most cases, there's not a lot the banks can do. Rachel Wolcott has been looking into the problem - and some possible solutions - and her article appears in the next issue of Risk.

Updated on November 6 - the article is now available online here.

More on the structure and pricing of CMS steepeners here. Discuss CMS steepeners in the Risk Forum.