China began reducing its holdings of U.S. government bonds again in June, and in fact cut just its holdings by the largest 1-month amount ever.

Bloomberg:

The nation’s holdings of long-term Treasuries fell in June for the first time in 15 months, dropping by $21.2 billion to $839.7 billion, a U.S. government report showed yesterday. Two- year yields headed for a fifth monthly decline in August, falling today to a record 0.48 percent.

Two-year rates will rise to 0.85 percent by year-end as the U.S. economy rebounds in 2010 from a contraction in 2009, according to Bloomberg surveys of financial companies. Reports today will show improvement in housing and manufacturing, signs of stability even as growth is less than expected, analysts said.

This happened as U.S. treasury yields declined to ever historically-lower levels during June, but selling in June wasn't a good move in retrospect. That's because U.S. yields fell even further in July and early August.