CDOR, the Canadian Dealer Offered Rate that serves as Canadian's version of Libor (London interbank offered rate), has been on a big run since April and its rise has only accelerated in July. Since early July, the one-month rate has jumped about 20 basis points, from 0.68 per cent to 0.87 per cent, while the three-month rate has gone from just under 0.90 per cent to 1.02 per cent.
It's no coincidence that Canada's overnight lending rate has also been on the rise.
CDOR is calculated by taking an average of rates on Canadian BAs (banker acceptances) and it's used as a benchmark for pricing things like commercial paper. Its rise is a promising sign for issuers at the very short end of the yield curve who saw investors flee once rates fell to just higher than zero per cent during the crisis. For almost a year from May 2009 to April 2010, three-month CDOR sat under 0.50 per cent. Compare that to over 3 per cent in the summer of 2008.
But just as short-term yields rise, longer term bonds have moved in the opposite direction. Since mid-April, five-year Canadas have dropped about 80 bps, down to around 2.4 per cent, and ten-years have shed close to 60 bps, now hovering around 3.2 per cent, because investors fled equities and bought bonds in the fall out of the European crisis.
Tim Kiladze