China's ownership of U.S. Treasuries fell to its lowest in nearly two years in March amid uncertainty about a trade deal between Beijing and Washington, data from the U.S. Treasury Department showed.

Since last week after a dismal 10-year Treasury auction, there has been renewed speculation whether China may sell its U.S. debt in retaliation for increased tariffs on $200 billion of its exports to the United States.

The latest data on China’s U.S. bond holding were collected before a sudden breakdown in trade talks between the world’s two biggest economic powers 1-1/2 weeks ago and prior to the U.S. duty hike on Chinese goods, which went into effect on Friday.

China sold $20.45 billion in Treasuries in March, the most since October 2016, following $1.08 billion in purchases the month before, the data showed.

China’s stake in Treasuries fell for the first time in four months to $1.121 trillion in March, which was the lowest since May 2017 when it was $1.102 trillion. It was $1.131 trillion in February, the data showed.

“The decline this month brings China essentially flat to where they were in February, erasing the increases from December through February,” Jefferies LLC’s senior money market economist Tom Simons wrote in a research note.

Despite the drop in Treasuries holdings, the world’s second-largest economy remained the largest U.S. creditor.

On the other hand, Japan raised its Treasuries holdings to $1.078 trillion, the highest since November 2017, from $1.072 trillion in February.

However, another set of Treasury data showed Japan sold $11.07 billion in U.S. government debt in March, the most for U.S.’s No. 2 foreign creditor, since February 2018.

Meanwhile, foreigners resumed sales of Treasuries in March as U.S. 10-year yields fell to 15-month lows after the Federal Reserve signaled it would not raise interest rates in 2019, according to the latest Treasury data.

They sold $12.53 billion in U.S. government debt in March after buying $19.91 billion the month before.

“Private investors have been big buyers of Treasuries since the beginning of the second half of 2018, but foreign official institutions have been inconsistent,” Simons said.

Official overseas selling of Treasuries coincided with a dollar rally in March spurred by safe-haven bids for the greenback amid worries about the global economy, trade tension and uncertainty around Brexit.

Central banks of export-oriented countries often sell their Treasury holdings to defend their currencies from a sharp appreciation of the greenback.

Overseas accounts also sold stocks for 11 straight months, reducing their equity stakes by $23.64 billion in March.

On the other hand, they bought $4.74 billion in agency securities and $1.11 billion of corporate bonds.

OUTFLOW PERSISTS

The latest data showed a net outflow from the United States totaling $8.1 billion in March, slower than the revised $21.5 billion in February.

Foreign central banks and other government entities accelerated their reduction of U.S. assets, selling $21.7 billion in March versus a revised $10.1 billion the month before.

The official foreign sales in March were offset by net purchases by private overseas investors which acquired $13.6 billion in U.S. assets after a revised $11.4 billion in sales in February.