The Financial Post reports in its Wednesday edition that a Bank of Canada official stated that a recent adjustment to how the central bank sets its deposit rate is enhancing money market functionality and reducing borrowing costs. A Bloomberg dispatch to the Post reports that as of Jan. 29, the deposit rate is now set five basis points below the policy interest rate, compared with being aligned previously. This change has improved market liquidity, with the Canadian Overnight Repo Rate Average (Corra) at 2.99 per cent on Friday, just below the BOC's policy rate of 3 per cent. This shift has encouraged some market participants to lend their settlement balances in the repurchase agreement market, according to deputy governor Toni Gravelle. He said large institutions that have access to Lynx, the high-value payment system, have started using the repo market more because they are not getting the same return as before from depositing the funds with the BOC overnight. "They have to go back to their boss and then say, 'Well, we're losing money relative to the target rate.'" Corra had been above the bank's target for nearly a year, signalling inefficiencies in short-term funding markets and resulting in higher borrowing costs.