China's primary money rates rose this week on higher insitutional demand for cash near the end of the first half, but gains were limited by net liquidity injections and as China's central bank resisted raising rates in step with the U.S. Federal Reserve. The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity, was 2.7628 percent on Friday afternoon. That was 5.4 basis points higher than the previous week's closing average rate of 2.7085 percent. The Shanghai Interbank Offered Rate (SHIBOR) for same tenor rose to 2.8100 percent, 3.8 basis points higher than the previous week's close of 2.7720 percent. The one-day or overnight rate stood at 2.5684 percent and the 14-day repo stood at 3.4864 percent. A portfolio manager at a domestic securities firm said the small rise in rates was largely driven by demand for cash by institutions ahead of mid-year tax payments, and as banks prepared for the central bank's macro-prudential assessment (MPA), a quarterly health check. The People's Bank of China (PBOC) met the demand with net injections of 240 billion yuan into money markets through open market operations. The rise in rates was also kept in check after the PBOC surprised markets by leaving borrowing costs for interbank loans unchanged this week. The central bank had been expected to follow the Fed, which on Wednesday raised interest rates by a quarter of a percentage point for the second time this year. The central bank's decision to keep rates unchanged comes amid uncertainty over China's economic outlook amid fears of a U.S.-China trade war and an ongoing government campaign targeting excessive financial risk. An official in the administration of U.S. President Donald Trump said on Thursday that the president had made up his mind to impose large tariffs on Chinese goods, prompting a warning from Beijing that it was ready to respond. The PBOC's decision to hold fast "is similar to the situation in June of last year," analysts from China International Capital Corporation (CICC) said in a note, referring to the PBOC's choice last June to leave rates unchanged following a Fed policy rate increase. "It releases a definite loosening signal." The analysts said they expected different regulatory bodies to implement policies that will help to mitigate the impact of a broader tightening of liquidity and guard against the spread of default risks. However, Rafael Halpin, head of research at Everbright Sun Hung Kai, called the absence of a PBOC rate hike "a non-event." "The PBOC's decision not to hike rates in the wake of U.S. interest rate increases should not be seen as a softening in its policy stance in order to avoid inflicting further stress on the economy," he said in a note. "Previous rate hikes have had zero impact on actual financing costs in the economy." Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.5684 2.5706 -0.22 0.00 Seven-day 2.7628 2.8474 -8.46 0.00 14-day 3.4864 3.5252 -3.88 0.00 Shanghai stock exchange repo market Overnight 3.7900 2.9000 +89.00 684,466.5 0 Seven-day<CN7DR 3.8400 3.2400 +60.00 71,307.50 PO=SS> 14-day 5.4800 3.6850 +179.50 26,453.90 PBOC Guidance Rates Overnight 2.5800 2.6000 -2.00 <CN1DRPFIX=CFXS > Seven-day 3.0000 3.2000 -20.00 <CN7DRPFIX=CFXS > 14-day 3.5500 3.6000 -5.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.5920 2.5910 +0.10 Seven-day 2.8100 2.8090 +0.10 Three-month 4.3520 4.3510 +0.10 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= 3.4600 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: (Reporting by Andrew Galbraith Editing by Jacqueline Wong)