* 14-day repo surges by 141.55 bps * Reverse repos issued last Friday due to expire * Banks hoard cash in advance of month-end withdrawals * Effect of RRR cut will be modest and gradual By Gabriel Wildau SHANGHAI, Feb 23 (Reuters) - The price of short-term liquidity jumped in China's interbank market on Thursday, as reverse repos conducted last week are set to expire on Friday. The weighted-average 14-day bond repurchase rate surged by 141.55 basis points to 6.4274 at midday, just shy of the level it reach on the day before the Spring Festival holiday. The price for benchmark seven-day repo loans also strode higher by 42.10 basis points to 5.5238 at midday and reached as high as 7.00 percent for individual transactions. The People's Bank of China (PBOC) injected cash into the banking system last Friday via unannounced seven-day reverse repos with selected banks in order to ease an acute liquidity shortage, the China Securities Journal media previously reported. Those repos are now set to expire. In addition, despite the cut in banks' required reserve ratio announced on Saturday, banks are showing their usual caution about lending out funds near the months' end. Corporate depositors traditionally withdraw cash in this period, and dealers believe the effect of RRR cut, which takes effect on Friday, will appear only gradually. In another indication of the funding squeeze affecting some banks, an auction for six-month finance ministry deposits on Thursday morning yielded an interest rate of 6.8 percent, nearly twice as high as the benchmark one-year deposit rate of 3.5 percent for corporate and household deposits. "The pressure on banks to attract deposits is pretty heavy because of the loan-to-deposit ratio," said a dealer at a foreign bank in Shanghai. Dealers still expect rates to fall beginning on Friday, when the cut in the required reserve ratio takes effect. But the fall is likely to be modest. The overnight rate should break below 5 percent next week, one trader predicted. But the seven-day rate will remain above 5 percent, she said. Current Prev close Change (pct) (bps) 7-day repo 5.5238 5.1028 +42.10 7-day SHIBOR 5.4850 5.0317 +45.33 Note: Repo rate is weighted average.