MercoPress. South Atlantic News Agency

Record fall for US Treasury bonds demand; China net seller

Japan remains faithful to the almighty greenback

Foreign demand for US Treasury bonds and notes fell by a record amount in December as China reduced its holdings. The Treasury said foreign holdings of US debt dropped by 53 billion USD, surpassing the previous record set last April.

China cut its holdings by 34.2 billion - meaning it is now the second-biggest US debt holder after Japan.

The drop in demand may mean that the US has to pay more to borrow, just as the government has to fund a record budget deficit.

In total, net purchases of long-term stocks, bonds and notes increased by 63.3billion in December, down from 126.4 billion in the previous month, the Treasury said.

China was a net seller for a second straight month.

Its bond holdings amounted to 755.4 billion in December, down from 789.6 billion the previous month.

China has previously questioned whether the US bonds are safe and whether it can sustain its deficits. It has also questioned the US dollar's role as the world's reserve currency.

President Barack Obama earlier this month released a budget plan that expects the federal deficit for 2010 to be a record 1.56 trillion USD, surpassing last year's record of 1.4 trillion. (BBC).-