The prospect of losing even a portion of the US Treasuries acquired by China, the largest buyer of American debt, rattled US markets on Wednesday after a news report suggested China would either trim or halt purchases.

Bloomberg News, citing people familiar with the matter, said senior officials in China reviewing the nation's foreign-exchange holdings recommended slowing or halting the buying of US Treasuries as they look less attractive than other assets. The report also said that trade tensions between the US and China may also provide a reason for the change.

Treasuries fell on the report, as the yield on the 10-year US Treasury rose as high as 2.597 percent before falling back to 2.56 percent following a $20 billion auction that attracted strong demand, traders said.

China has the world's biggest currency reserves, approximately $3 trillion, and is the biggest foreign holder of US government debt, with $1.19 trillion in Treasuries as of October 2017, according to data from the Treasury Department.

Nathan Sheets, chief economist of PGIM Fixed Income, a business of PGIM, the global investment management businesses of Prudential Financial Inc, said in an email that US Treasuries are considered safe assets with demand from various sources that often ebbs and flows.

"Reduced Chinese participation in the Treasury market would be notable, but I believe it would be smoothly offset by other sources of demand. These sources could be from abroad, but could also be US institutions and other investors," he said.

Sheets noted that the report comes at a time when the markets will be absorbing an increase in the supply of US Treasuries.

"We are entering a period of increased supply given the ongoing fiscal deficit, the financing of the tax cut, and the Fed's (US Federal Reserve) efforts to pare its balance sheet," said Sheets, who added that the underlying dynamics in the market require watching closely.

"If China stops buying Treasuries, the market could suffer," strategists at Jefferies said on CNBC.

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