The weighted-average one-day bond repurchase rate fell 1 basis point to 1.93 percent from 1.94 percent on Monday, the lowest level since early June.

"I have not seen the one-day rate fall below 2 percent for a very long time," said a dealer at a mid-sized Chinese bank in Shanghai.

"That means money market conditions are extremely relaxed."

The benchmark weighted-average seven-day repo rose to 2.98 percent from 2.94 percent at the close, and the 14-day repo rate rose to 2.92 percent from 2.80 percent.

Dealers said the rise in 14-day repo rates was due to the central bank's abstention from issuing such tenors on Tuesday, which forced some institutions which were hopping to borrow money in that tenor to shop in the interbank market.

China's central bank injected 43 billion yuan ($6.91 billion) into the money markets through 7-day reverse bond repurchase agreements on

Tuesday, but 110 billion worth of previously issued reverse repos matured, draining funds. So far the PBOC has conducted a net drain of 67 billion yuan for the week.