This is an investigation of the Japanese yen and U.S. dollar interest rate swap markets during 1990–2000. It examines spreads over comparable Treasury yields for different maturities and the transmission of shocks to swap spreads and volatilities from one market to the other. The correlations between yen and dollar interest swap spreads are low, indicating that the credit risk factor is country-specific. Changes in the dollar interest rate swap spreads “Granger-cause” changes in the spreads of yen interest rate swaps for the long (ten-year) maturities. Yen swap spreads are highly correlated with interest rate differentials between the two markets, which influence subsequent movements in yen swap spreads. Transmission of the volatility of swap spreads is strong from the dollar to the yen markets and relatively weak in the other direction. These and other results suggest that specific institutional aspects, such as illiquidity and market frictions, may have affected the yen interest swap market more than the dollar market.