China overtook Japan two months ago to become the biggest foreign holder of U.S. treasury bonds, Bloomberg.com reports.

The U.S. Treasury Department said Tuesday in Washington that China led all foreign official investors in September by posting a net increase of over 43 billion dollars of U.S. treasuries, the highest amount China got over the last three quarters, bringing its total ownership close to $585 billion.

Japan, now the second-largest foreign owner of U.S. government debt, reduced its holdings by $12.8 billion to $573.2 billion.

China's ownership of U.S. government debt has doubled since July 2005, while Japan's holdings are down from a peak of $699 billion in August 2004.

The U.K., the third-largest foreign owner of U.S. treasuries, increased its holdings to $338.4 billion.