China Reduces Holdings Of US Treasuries

China cut its holding of US Treasuries in December The People’s Republic dropped its U.S. debt securities by $31.9 billion from November–2.8%, to $1.11 trillion, according to the Treasury Department

The general theory for the fall off is that China has put some of its money to work in Europe where it is buying sovereign debt as the financial crisis spreads. China could buy these bond at low prices and high yields, which will eventually be a bargain if the regions recovers.

A more sinister, and much less likely interpretation, is that China is pressuring the US to tread lightly on trade and currency matter. However, the yield on US debt is near longtime lows, not matter what China’s intentions may be