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CARR publishes recommended conventions for Term CORRA swaps

Today, the Canadian Alternative Reference Rate working group (CARR) published two recommended conventions for interest rate swaps referencing Term CORRA:

  1. Term CORRA to fixed interest rate swap
  2. Term CORRA to CORRA basis swap

CARR is recommending these terms as part of a broader effort to develop and promote industry agreed market standards for products referencing risk-free rates in the Canadian marketplace. The development of consistent market conventions across different types of financial products can help promote liquidity and facilitate both market making and hedging activities. In doing so, market conventions can lead to a more robust market.

The Term CORRA-to-fixed interest rate swap convention has been developed to align with CARR’s recommended terms for Term CORRA-based loan facilities. Companies with Term CORRA-based loan facilities that use Term CORRA based interest rate swaps to hedge to a fixed interest rate are recommended to follow these conventions to ensure an alignment of terms between their loan and its hedge. Borrowers that wish to hedge Term CORRA loans with Term CORRA derivatives could see higher hedging costs than if they were using overnight CORRA for both their loan and their derivative hedge. This is due to the one-sided nature of the hedging demand from bank loan end-user clients.

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.

Market inquiries

CARR co-chair
Senior Policy Director
Financial Markets Department
Bank of Canada

CARR co-chair
Managing Director and Vice Chair
CIBC Capital Markets

Media inquiries

Media Relations
Bank of Canada