The formation of interbank interest rates and treasury bill yields in Japan under different regimes of non-traditional monetary policy

Interbank interest rates and Treasury Bill (TB) yields of maturities of three and six months move together, but not 12 months, under a “quantitative and qualitative easing policy.” On the other hand, interbank interest rates and TB yields of maturities of 3, 6, and 12 months move together under a “negative interest rate policy.” Interbank and TB markets are partially integrated up to the 6-month maturity as a short-term money market under a “quantitative and qualitative easing policy,” while interbank and TB markets are integrated up to the 12-month maturity as a short-term money market under a “negative interest rate policy.” This indicates that the arbitrage of interbank and TB markets works. Practitioners of the interbank market are limited to financial institutions, but those of TB markets also include non-financial institutions.