CHINA, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the U.S. Federal Reserve announced plans to slow asset purchases.

    China cut its position in U.S. government bonds by US$47.8 billion, or 3.6 percent, to US$1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data released yesterday.

    At the same time, international investors increased holdings by 1.4 percent, or by US$78 billion, in December, pushing foreign holdings of U.S. government bonds to a record US$5.79 trillion.

    Yields on benchmark 10-year notes rose to 3 percent in December, the most since July 2011, after Federal Reserve officials announced plans to begin scaling back the U.S. central bank’s bond purchase program, designed to keep borrowing rates low and jump-start the U.S. economy.

    The prospect of tapering sent U.S. government bonds down 3.4 percent in 2013, the first annual decline since 2009’s 3.7 percent loss. (SD-Agencies)