China’s holdings of U.S. debt dropped to the lowest since 2010 after falling below the $1 trillion mark in May, according to data released by the U.S. Treasury on Aug. 15.
After seven months of continuous decreases, China’s U.S. Treasury holdings dropped to $967.8 billion in June, $113 billion less than last November, according to international capital flows.
China decreased its debt holdings while the U.S. Federal Reserve has been raising rates aggressively to bring down high inflation, which means the sale of bonds ahead of maturity will lead to a capital loss.
Bond prices have an inverse relationship with the prevailing interest rates. Driven by the market forces to pursue higher interest payments, older bonds become less valuable when interest rates rise as interest payments are now lower than new bonds available in the market….