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China's primary money rates fell for the week after the central bank made the largest weekly net fund injection in 10 months, in what traders said was targeted at easing liquidity stress in the financial system and calming a recent bond market rout. The People's Bank of China (PBOC) injected a net 810 billion yuan ($122.24 billion) via reverse repos in open market operations this week, compared with a net drain of 230 billion yuan a week earlier.
The weekly net injection was the largest since mid-January.
The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was 2.7470 percent on Friday morning, around 20 basis points lower than the previous week's closing average rate of 2.9438 percent.
Traders said the large cash injection was not only to counter tight liquidity from seasonal tax payments and maturing reverse repurchase agreements, but to ease tension from a sell-off in bonds.
China's 10-year treasury bond yields surged to a high of 4.033 percent at one point this week, their highest in more than three years, as institutions sold off liquid securities to strengthen their cash positions amid worsening market sentiment.
"The recent CGB sell-offs appear to have struck a nerve with policymakers, prompting the PBOC to take action to stabilise market liquidity conditions," said Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong.
The yield on Chinese 10-year treasury bonds was at 3.950 percent on Friday morning, slightly higher than the previous week's close at 3.918 percent.
However, traders said they did not see liquidity support as altering the PBOC's monetary policy stance. They see the central bank continuing to closely manage cash conditions while keeping its deleveraging campaign on track.
Repo rates for other tenors also drifted lower this week. The one-day or overnight repo rate stood at 2.6978 percent on Friday morning, around 4 basis points lower than the previous week's closing price. And the 14-day repo stood at 3.9112 percent, compared with last Friday's close of 3.9336 percent.
The spread of the five-year credit default swap rate on Chinese sovereign debt fell 2.19 percent to 61.57.

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