CHINA'S central bank yesterday injected funds into financial institutions through open market operations for the first time in five months, easing interbank borrowing costs from a four-week high.

The People's Bank of China issued 17 billion yuan (US$2.8 billion) seven-day reverse bond repurchase contracts, the first money injection of the kind since February.

It is also the first time the central bank conducted an open market operation since June 20, when the PBOC effectively engineered the decade's worst credit crunch by not injecting money as a warning against banks' risky lending practices.

The seven-day repurchase rate, indicating borrowing costs among banks, yesterday fell 0.12 percentage point to 4.99 percent, according to a weighted average compiled by the National Interbank Funding Center. It exceeded 5 percent on Monday for the first time in four weeks and reached a record 12.45 percent on June 20.

The central bank yesterday set the yield at 4.4 percent, nearly one percentage point higher than similar contracts issued in January and February.

Analysts said the move indicates a milder stance from the central bank, but liquidity will remain relatively tight as cash becomes more expensive.

"The amount of reverse repurchase was small but it helped stabilize market sentiment in the short term," Orient Securities wrote in a note yesterday. "The central bank won't allow a repeat of last month's credit crunch, but the higher yield implied that it will continue to remind banks to control liquidity at a reasonable level."