SHANGHAI, March 9 (Reuters) - China's primary money rates fell this week as earlier efforts by the central bank to keep cash in the financial system during a key political summit in Beijing kept liquidity ample. 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 2.7437 percent on Friday afternoon, about 17 basis points lower than the previous week's closing average rate of 2.9150 percent. Traders said cash conditions were balanced with a loosening bias this week, and such a situation was well expected as the annual meeting of parliament kicked off in Beijing on Monday. Traditionally, Chinese authorities have sought to push for stability as major volatility in the economy would be unwelcome during major political events. In open market operations, the People's Bank of China skipped reverse bond repurchase agreements for the entire week, with maturing reverse repos draining 240 billion yuan ($37.85 billion) on a net basis for the week. "The central bank is likely to skip or inject a small amount of cash in open market operations next week to gradually absorb the liquidity it had offered," Ming Ming, analyst at CITIC securities said in a note. "The monetary policy stance would then return to prudent and neutral to end the easing liquidity seen during the Lunar New Year holiday and the annual meeting of parliament." The central bank injected 105.5 billion yuan to financial institutions on Wednesday via its 1-year medium-term lending facility (MLF), rolling over the same amount of the MLFs expiring that day. The PBOC failed to inject enough funds to cover all maturing MLF for the month with another batch of MLFs worth 189.5 billion yuan set to expire on March 16, triggering speculation about a possible market rate hike in the next rollover, similar to what it did in December shortly after the Federal Reserve's interest rate hike. The PBOC raised its short- and medium-term market rates just hours after the Fed's rate decision in December. This time, the Fed decision will be made on March 21. China's central bank will probably have to respond to an expected U.S. interest rate rise at a particularly sensitive time later this month. "It's possible for the central bank to follow and add five basis points this time. But I don't think the market actually cares too much about it as a five to 10 basis point hike in the open market operations is not huge enough to affect the prices in money market trade," a trader at a major Chinese bank said. On the sidelines of the annual parliament session, PBOC Vice Governor Yi Gang said on Friday that whether China would raise rates depended on real economic conditions. Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.5594 2.5433 +1.61 0.00 Seven-day 2.7437 2.7536 -0.99 0.00 14-day 3.4554 3.4787 -2.33 0.00 Shanghai stock exchange repo market Overnight 2.8950 2.8400 +5.50 367,901.7 0 Seven-day<CN7DR 3.2800 3.2300 +5.00 39,563.40 PO=SS> 14-day 3.4450 3.4150 +3.00 15,530.90 PBOC Guidance Rates Overnight 2.5800 2.5500 +3.00 <CN1DRPFIX=CFXS > Seven-day 2.9000 2.9000 +0.00 <CN7DRPFIX=CFXS > 14-day 3.5000 3.5000 +0.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.5730 2.5700 +0.30 Seven-day 2.8570 2.8620 -0.50 Three-month 4.7410 4.7407 +0.03 KEY INTEREST RATE SWAPS: Instrument RIC Rate Spread vs 1 yr official deposit rate* 2 yr IRS based on 1 CNABAD2YF= 0.0000 -1.5 year benchmark 5 yr 7-day repo swap CNYQB7R5Y= 3.8700 n/a *This spread can be seen as a proxy for forward-looking market expectations of an interest rate cut or rise China FX and money market guide: China debt market guide: SHIBOR rates: Reports on central bank open market operations: New Chinese debt issues: Prices for central bank bills, treasury bonds and sovereign bonds: Overview of China financial market data: ($1 = 6.3410 Chinese yuan) (Reporting by Winni Zhou and John Ruwitch; Editing by Sam Holmes)
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