China cut its U.S. Treasuries holdings to the lowest level since 2017 in March amid the trade dispute between the world's two biggest economies.

It was only a slight reduction—the stake slipped by $10.4 billion, the first drop since November —but that was enough to bring the position down to a two-year low of $1.12 trillion, according to data the U.S. Treasury Department released Wednesday.

China owns more U.S. government debt than any other foreign nation, and slashing those holdings is viewed by some as a nuclear option—albeit an unlikely one—in the worsening trade negotiations. Bond markets were jolted last year when China officials recommended slowing or halting purchases.

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