(Yicai Global) July 19 -- China’s holdings of US Treasury bonds shrank for the sixth consecutive month in May to less than USD1 trillion for the first time in 12 years as US interest rates headed higher.

China cut its holding by USD22.6 billion to USD980.8 billion in May, but still remained the United States’ second-biggest creditor, according to data released by the US Treasury Department yesterday. That was the lowest since May 2010 when it held USD843.7 billion.

With US inflation running at a more than 40-year high, hitting 9.1 percent in June compared with a year earlier, investors expect more aggressive increases in benchmark interest rates by the Federal Reserve, which hiked rates by 75 basis points last month following a rise of 50 bips in May.

Japan was still the top owner of Treasuries in May despite reducing its stash for the third month in a row. Japan shaved USD5.7 billion from its holdings to USD1.213 trillion.

Editor: Futura Costaglione