By the end of September 2008, China became the largest holder of U.S. government bonds, increasing its holdings to 585 billion dollars. Interest in Treasury securities rose as confidence in stocks and other assets fell, and amid record budget deficits the U.S. Treasury actively issued bonds. Analysts believe China will remain the main buyer of U.S. debt, placing its worlds largest foreign exchange reserves into it.

China became the largest holder of U.S. government bonds at the end of September 2008, Bloomberg reports. By the end of the month, the PRC held obligations worth $585 billion, which is $43.6 billion more than a month earlier.
The total volume of net purchases of government bonds amounted to $89 billion, compared with $30 billion a month earlier. Investor activity in the U.S. government securities market was driven by falling confidence in stocks and other securities, which showed a significant decline in September.
At the same time, the U.S. Treasury actively issued bonds because of the need to finance the U.S. federal budget, which reached a record $450 billion for fiscal 2008 (from October to September). The total U.S. national debt exceeded $10 trillion, which is just under 70 percent of GDP.
Interestingly, purchases of debt obligations of the U.S. government-sponsored agencies (GSEs) Fannie Mae and Freddie Mac also increased, amounting to $6.2 billion. In August, net sales of $8.2 billion were recorded. Recall that the debts of both mortgage agencies were officially guaranteed by the government in September.
Investors were not deterred from increasing their presence in U.S. bonds even by their yield, which fell for 10-year securities by 0.2 percentage points to 3.68 percent per annum compared with the end of August.
Analysts predict that China will continue to remain the main buyer of U.S. government debt in the foreseeable future. In this way, the PRC places its largest foreign exchange reserves in the world, the volume of which exceeded $1.8 trillion by October. Japan, whose reserves amount to just under $1 trillion, is in second place. Russia has the third-largest reserves (about $480 billion