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China's US Treasury holdings fell to a 12-year low in October, marking the second straight month of cuts and leaving its holdings below $1 trillion for the sixth straight month, latest data showed.

Japan, the US' largest creditor, China, its second largest and the UK, the third largest, all cut US debt holdings in October. Analysts said that the sale by so many economies was a sign of their waning confidence in US debt.

China's holdings of US Treasury bonds decreased by $24 billion to $909.6 billion in October, the lowest level since June 2010, according to data from Treasury International Capital (TIC), reporting system of the US, released on Friday.

Japan's holdings of US Treasuries fell $42 billion to $1.078 trillion in October, marking the fourth consecutive month of selling and the lowest in more than three years.

In October, only Belgium and France among the top 10 holders of US debt increased their holdings, while all eight other economies reduced them.

Recently, liquidity in the US Treasury market has deteriorated significantly. The market liquidity index has fallen to the level of March 2020 when US Treasuries were sold off sharply, and the deterioration in market conditions is approaching that of the global financial crisis, according to a report by China International Capital Corporation (CICC) seen by the Global Times.

US Treasuries are not only the anchor of global asset pricing, but also play an important role in the global dollar liquidity transmission system after the financial crisis. This means the potential risks in the US Treasury market may have a systemic impact, read the CICC report.

Over the past month or so, the US Federal Reserve (Fed) has begun to focus more on financial stability in addition to keeping a firm grip on inflation. The Fed, the US Department of the Treasury and US banks have all been discussing possible solutions on how to strengthen the resilience of the US Treasury market.

In fact, the deterioration of liquidity in the US Treasury market this year is not only due to the cyclical pressure of the Fed's aggressive tightening, but also the result of the gradual emergence of structural vulnerabilities that have been building up for a long time, said analysts.

US Treasury Secretary Janet Yellen said in mid-October that she is "worried about a loss of adequate liquidity in the market."

Global Times