BEIJING - The People's Bank of China (PBOC), or the central bank, on Tuesday conducted 14-day reverse repurchase agreement (repo) operations worth 169 billion yuan ($26.72 billion), injecting cash into banks to ease a liquidity squeeze ahead of a Chinese holiday.

The yield of the reverse repo, a process of central banks purchasing securities from banks with an agreement to resell them at future dates, stood at 5.47 percent and well exceeded the benchmark interest rate of 3.5 percent for one-year deposits.

In Tuesday's money market, the Shanghai Interbank Offered Rates (Shibor), which measure the cost for banks to borrow from one another as a key barometer of liquidity, were all higher except the one-year Shibor.

Higher yields of Shibor indicate banks are running out of liquidity amid Chinese soaring demands for cash ahead of the week-long Lunar New Year holiday, which begins on Sunday.

The most important annual holiday in China typically sees Chinese withdrawing money from banks for celebrations, and companies paying year-end bonuses.

The overnight Shibor jumped 189.42 basis points to 7.3667 percent on Tuesday, compared with 3.24 percent a week ago. Meanwhile, the Shibor for one-week and two-week terms surged 182.67 basis points and 140.5 basis points to 7.4117 percent and 7.8267 percent, respectively.

The one-month term Shibor rose 88.92 basis points to 7.7992 percent. The Shibor for one-year term dipped 0.12 basis points to 5.2369 percent.

"The market is short of liquidity ahead of the Spring Festival and the 160-billion-yuan reverse repo is not enough to fill that gap," said Lu Zhengwei, an economist with the Industrial Bank Co. Ltd.

Lu expected the central bank to continue its reverse repo operations through its regular open market operations on Thursday and pump liquidity totaling 400 yuan into the money market, an amount that matches the quantity by cutting the bank reserve requirement ratio.

Before the PBOC's reverse repo business on Tuesday, 120 billion yuan of cash had been injected into the money market this month with the maturity of previously sold bills.

Earlier this month, the central bank announced that it would suspend bill sales to ease the liquidity squeeze in the money markets.

As only 2 billion yuan of cash will be released back to banks by bills due in the coming two weeks, an imminent policy loosening looks very likely, said Liu Junyu, an analyst with the China Merchants Bank.