Core Insights - The report discusses the evolution, risk-return profile, and market role of floating-rate financial bonds in China, highlighting their significance in optimizing the market interest rate transmission mechanism and promoting green finance initiatives [2][8]. Group 1: Development and Market Analysis of Floating-Rate Financial Bonds - The floating-rate bond market in China began in 1995 and has undergone three significant expansion phases, with a notable decline in issuance scale since 2022 due to falling interest rates. As of June 27, 2025, the total outstanding floating-rate bonds amounted to 514.7 billion yuan, with financial floating-rate bonds constituting the majority at 395 billion yuan [7][12]. - The current floating-rate financial bonds are primarily linked to the DR007 (51%) and the 1-year LPR (39%), reflecting a dual characteristic of short-term monetary market rates and medium to long-term financing costs [13][14]. - The secondary market for floating-rate bonds has been sluggish, with monthly trading volumes dropping to around 50 billion yuan, accounting for only 0.12% of the total bond market transactions [14][18]. Group 2: Pricing Analysis and Risk Attributes - The pricing of floating-rate bonds follows the principle that the current coupon equals the benchmark interest rate plus a fixed spread. This structure provides significant resistance to interest rate risk, as the coupon can adjust in line with market rates, resulting in lower net price volatility compared to fixed-rate bonds [22][23]. - Empirical analysis shows that during periods of rising benchmark rates, floating-rate bonds exhibit a smaller decline in net price compared to similar fixed-rate bonds, indicating their superior performance in such conditions [27][28]. Group 3: Future Prospects and Roles of Floating-Rate Bonds - For investors, floating-rate bonds offer a natural yield enhancement effect during rising interest rate phases, serving as a robust risk-hedging tool. They are less sensitive to interest rate changes, making them suitable for managing valuation volatility [30]. - For issuers and the bond market, the dual issuance of fixed and floating-rate bonds enhances funding options and attracts diverse capital sources. This approach maximizes fundraising efficiency and meets varying investor demands, thereby improving overall market liquidity [31]. - The "floating-rate green bond" model aligns with green finance policies, enhancing environmental benefit disclosures and attracting ESG investments, supported by recent regulatory initiatives promoting green bond development [31].