In 2021, CARR published “Recommended fallback language for FRNs referencing CDOR” which recommended that CDOR-linked floating rate notes (FRNs), including floating rate NHA MBS, fall back from CDOR to a CORRA fallback rate (“Fallback Rate (CORRA)” as defined in the document). This CORRA fallback rate has been broadly adopted in new bond issues referencing CDOR since that date. As the cessation of CDOR draws closer however, CDOR NHA MBS issuers and investors have identified unique aspects of these securities precipitating a detailed review of CARR’s Recommended Fallback for CDOR NHA MBS.
Following this review, CARR has amended its recommended fallbacks for CDOR NHA MBS securities to align calculation methodologies of newly issued CORRA-based NHA MBS and those using the fallback. This change to CARR’s Recommended Fallback only applies to CDOR NHA MBS. All other CDOR-linked securities, including Canada Mortgage Bonds (CMB), should incorporate CARR’s recommended “Fallback Rate (CORRA)” language and methodology.
Separately, CARR has now published a guide for Canadian companies transitioning from CDOR. This document aims to assist Canadian companies as they plan for the cessation of CDOR. The document provides high-level guidance on the key points to consider when assessing the impact of the cessation of the rate and the replacement of CDOR with alternative reference rates such as CORRA, Term CORRA, or prime.
About CARR
Canada established CARR, a working group sponsored by the Canadian Fixed-Income Forum, to coordinate Canadian interest rate benchmark reform. CARR’s mission is to ensure Canada’s interest rate benchmark regime is robust, resilient and effective in the years ahead. Over the coming transition period, CARR will support the transition from CDOR to CORRA as the key Canadian interest-rate benchmark.
Visit CARR’s webpage for up-to-date information on the transition, including all of CARR’s key documents, and to sign-up to receive email updates from CARR.
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Senior Policy Director
Financial Markets Department
Bank of Canada
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CARR co-chair
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CIBC Capital Markets
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