China promotes floating-rate bonds to help improve risk management

SHANGHAI, Jan 17 (Reuters) - A financial market association under China's central bank said on Friday it would promote the market in floating-rate bonds to help investors manage interest rate risks and improve the country's rate-management mechanism.

The statement from the National Association of Financial Market Institutional Investors (NAFMII) came as Chinese authorities stepped up efforts to cool a red-hot bond market to head off bubble risks and lend support to a falling yuan.

Bonds with floating rates tied to a benchmark rate "can offer more options to manage interest rate risks in the bond market", NAFMII said.

Such an instrument, which has huge growth potential, "can also play an active role in improving China's interest rate management mechanism," it said.

NAFMII said it held a meeting on Thursday with market participants to promote the growth of floating-rate bonds, with the People's Bank of China (PBOC) offering guidance.

Participants, including bond issuers, investors and intermediaries vowed to actively develop the market of floating-rate bonds, according to the statement. (Reporting by Shanghai newsroom; Editing by Alex Richardson)