Certificates of Deposit Index (CODI) Explained:

This index is the 12-month average of the monthly averaging yields of 3-month Certificates of Deposit. This index is calculated by averaging the previous 12 rates of the 3-month CD rate. This particular index is an annual average, and it is far steadier than CD rates offered by banks.

What does the CODI index mean to a borrower?

The 12-month average of the most recently published dealer bid rates (yields) on nationally traded three-month certificates of deposit as reported in the H.15 Federal Reserve Statistical Release. The yields are annualized using a 360-day year. For purposes of determining CODI, "published" means first made available to the public by the Federal Reserve Board. The CODI index is calculated on or near the first Monday of each calendar month and is often used for adjustable rate mortgages.

Because the CODI index is a 12-month moving average, it is not as volatile as other popular mortgage indexes such as the one-month LIBOR index. The CODI also tends to lag other mortgage indexes in the rate at which it adjusts when interest rates change.

What are some facts and history behind CODI index?

Right before the 1987 stock market crash, Chase Manhattan Bank offered the first equity-linked certificates of deposit. For a fixed period of time,(let’s say one year) an equity-linked certificate of deposit guaranteed a return of at least 4% (below-market interest rate), but with the potential to earn 90% of the rate of return on the S&P 500 Index over the year, should it be larger.

In 1996, the Chicago Board Options Exchange (CBOE) listed S&P 500 equity linked Notes and technology market index target-term securities. (MITTS) The former pays at maturity a fixed-cash amount plus a non-negative amount based on the percentage increase. Information on monthly yields on 3-month certificates of deposit (secondary market) is published by the Federal Reserve Board.