SHANGHAI, Oct 16 Reuters China39;s central bank ramped up liquidity support to the banking system as it rolled over mediumterm policy loans on Monday, but kept the interest rate unchanged amid concerns about the risk of more sharp yuan declines.

The People39;s Bank of China PBOC is walking a tightrope between keeping liquidity ample to aid a struggling economy and stabilising the yuan amid expectations of higher for longer U.S. rates.

The PBOC said in a statement it conducted mediumterm lending facility MLF operations worth 789 billion yuan 107.96 billion to keep liquidity in the banking system adequate.

With 500 billion yuan worth of MLF loans maturing, the PBOC is pumping 289 billion yuan of fresh liquidity into the banking system, the biggest such net injection in nearly three years.

Meanwhile, it held the rate on the oneyear policy loans unchanged at 2.50, in line with a Reuters poll last week.

Monday39;s operations shows the PBOC hopes to provide liquidity to ease stress in the market, said Stone Zhou, director of Global Markets at UOB China.

This month, a slew of Chinese local governments, including Liaoning and Chongqing, are rushing to issue special refinancing bonds to repay outstanding liabilities, as Beijing steps up efforts to reduce growing debt risks that remain a worry for investors.

Analysts expect issuance of such bonds to hit at least 1 trillion yuan this year.

In addition, tax collections by the government in October will also likely cause…