Case Study: What the CORRA Forward Curve Tells Us - April 2025

With Trump’s latest tariff proposals shaking global markets, what does the Canadian interest rate outlook tell us about what’s next?

We analysed the CORRA forward curve – the market’s forecast for Canadian  interest rates – and what it might mean for businesses borrowing, refinancing, or hedging decisions in 2025.

And if you stay till the end, you’ll find a bonus section comparing CORRA curve in April 2025 to one year ago.

What is the CORRA forward curve?

The CORRA forward curve shows the market’s expectations for the Canadian Overnight Repo Rate Average (CORRA) over time. It’s derived from swap rates and reflects how rates are projected to evolve based on current market swap rates.

This curve is a key input into everything from debt pricing to interest rate hedging. It’s especially useful when forecasting future cash flows or valuing floating-rate instruments.

April 2025: A steep climb, then a long glide

Here’s what we’re seeing in the latest CORRA forward curve:

• Short-term cuts still priced in: Markets expect the Bank of Canada to ease slightly in the near term, with CORRA dipping just below 2.5% by early 2026.
• Rates then rise steadily: From there, the curve climbs to just over 3.7% by the late 2030s.
• A long-term return to normal: Beyond 2040, the curve slopes downward again, suggesting a belief that structurally lower rates will return – settling around 2.5% by the 2050s.

This shape – short-term easing followed by a tightening cycle, then a long-term softening – is common across global rate curves right now.

Why does this matter now?

The recent Trump tariff headlines are a wildcard. If implemented, tariffs could:

• Drive inflation higher, especially in North America due to supply chain impacts.
• Force central banks to keep rates higher for longer, pushing up the back end of the curve.
• Increase volatility in funding costs – critical for Canadian corporates and global investors with CAD exposure.

What should businesses do with this?

Here’s how companies are already using the CORRA forward curve:

• Project interest payments: Forecasting loan costs over the life of a project or facility.
• Plan refinancing: Timing matters - locking in now vs. rolling over in 2030 may imply very different costs.
• Value swaps and floating-rate notes: Especially important for treasury teams managing debt portfolios.
• Stress test IRRs and covenants: Essential for infrastructure, real estate, and private credit funds.

Final thoughts

The CORRA forward curve isn’t just a market curiosity. It’s a forward-looking lens into monetary policy and business risk.

And right now - with inflation, tariffs, and elections looming – that lens matters more than ever.

At BlueGamma, we provide CORRA and other forward curves in Excel or via API, updated daily.

📈 Bonus: How the CORRA Curve Has Shifted Since April 2024

It’s useful to not just look at where rates are going — but also how expectations have changed.

We compared the latest CORRA forward curve with where it stood a year ago in April 2024:

• Short-term expectations have moved higher – In April 2024, markets expected CORRA to fall below 3**.5% by 2027**. Today, the same dip is still forecast, but the path down is steeper and starts from a lower base.
• Mid-2030s rates are now projected to be 40–50bps lower than a year ago likely driven by inflation persistence and fiscal uncertainty.
• By the 2050s, the curves converge again, both settling around 2.5%. This suggests long-run neutral rate expectations are still anchored.

📊 What this tells us: Markets are recalibrating the timing and magnitude of rate moves, but the long-term destination hasn’t changed. For businesses, that means more near-term rate risk – but still some stability ahead.

👉 Want to explore the data? Get in touch or drop us a line and we’ll send over an Excel version.