China’s holdings of US government debt fell to US$1.15 trillion at the end of 2011 from US$1.16 trillion the year before, the first year-on-year drop since tracking began in 2001, Bloomberg reported. China’s portfolio of US government bonds peaked at US$1.32 trillion in July, according to figures from the US Treasury. The country reduced its exposure in the second half of the year, as yields on 10-year government bonds dropped to a record low of 1.67%. “With 10-year notes sub 2 percent [Chinese policymakers] don’t have a lot of interest or appetite for Treasuries,” said Royal Bank of Scotland head US government bond strategist William O’Donnell. China has aimed to diversify its foreign exchange reserves away from US assets since 2007, but still remains one of the largest holders of US debt. Japan retained its position as the second-largest foreign lender to the US, holding US$1.06 trillion of Treasuries at the end of 2011.