Variable-rate demand notes are long-term debt where the interest rate fluctuates on a short-term, sometimes weekly basis. Like their cousins before them; subprime, CDOs, SIEs, SIVs, and the rest of the toxic alphabet soup, these notes have just done a swan dive into an empty swimming poll too.
As an example, rates on $300 million of California debt just went from 2% to 8.5%. Ouch. Lots of other such debt is feeling similar pain today too.