China, Japan sell US debt holdings

The Treasury Department reported Tuesday that China and Japan sold off some of their vast holdings of U.S. debt in December, around the time the Federal Reserve announced it would be curtailing its stimulus program.

The sell-offs have accelerated a drop in bond prices and rise in yields.

{mosads}China, America’s top creditor, reduced its holdings from $1.317 trillion to $1.269 trillion, a reduction of $48 billion. Japan cut its holdings by $4 billion to $1.183 trillion.

Overall, Treasury reported foreign residents decreased their holdings of U.S. long-term debt by $18.6 billion in December, with most of that coming from official institutions and governments. Net adjusted foreign sales of long-term securities were $51 billion. 

The Federal Reserve announced in December that it would begin to decrease its buying of mortgage-back securities from $85 billion a month. New Federal Reserve Chairwoman Janet Yellen is forging ahead with that plan despite some conflicting signs about the strength of the recovery.