Foreigners in record flight from US Treasuries

A record drop in foreign holdings of U.S. Treasury bills in December means the government might have to pay higher interest rates on its debt to continue to attract investors. China reduced its stake by $34.2 billion in December and lost its position as the largest foreign holder of Treasury debt. Japan retook the top spot as it boosted its Treasury holdings. The Treasury Department said foreign holdings of U.S. Treasuries fell by a record $53 billion in December. Some analysts doubted the drop in foreign holdings signified growing unease. They noted net purchases of longer-term Treasury debt rose in December by $70 billion. But other economists saw the decline as a warning sign. Alan Meltzer, an economics professor at Carnegie Mellon University, said: "The Chinese are worried we have unsustainable debt levels, and we do not have a policy for dealing with it." Source