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SHANGHAI, Nov 21 (Reuters) - China's central bank drained short-term liquidity from the banking system for the first time in eight trading days on Monday, as bond markets recovered from a recent sharp sell-off.

The People's Bank of China (PBOC) injected 3 billion yuan ($419 million) through seven-day reverse repurchase agreements in open market operations on Monday. With 5 billion yuan worth of such loans maturing on the same day, it resulted a net withdrawal of 2 billion yuan, the first cash drain since Nov. 9.

The fund withdrawal came after the central bank net injected 368 billion yuan through such a liquidity instrument last week as the bond markets posted its biggest single-day sell-offs in two years, with risk appetite boosted amid rising expectations that China will gradually ease its strict COVID-19 restrictions and official moves to support the troubled property sector.

On Monday, bond prices rose across the board. The benchmark 10-year government bond futures rose more than 0.3% before finishing 0.18% higher. The yield on the government bond for the same tenor fell more than 3 basis points (bps) before closing down by 0.75 bps.

Sentiment has gradually recovered, traders said, adding that easing cash tensions and worsening domestic COVID-19 infections across the country also lent support.

"Both futures and spot markets rose in early trade as COVID situations intensified and cash situations loosened," said a trader at a brokerage.

Students in schools across several Beijing districts buckled down for online classes on Monday after officials called for residents in some of its hardest-hit areas to stay home, as COVID cases in China's capital and nationally ticked higher.

China kept its benchmark lending rates unchanged for the third straight month on Monday, with some market watchers predicting a marginal reduction to the mortgage reference rate as early as next month to prop up the broader economy.

China's financial regulators also told banks to step up credit support for the economy, including expanding medium to long-term loans to support infrastructure investment.

($1 = 7.1606 Chinese yuan) (Reporting by Winni Zhou, Li Hongwei and Brenda Goh; Editing by Lincoln Feast and Mark Potter)