This paper investigates empirically the relations between changes in volatilities of holding period returns on JGBs and changes in U.S. interest rates and the yen/dollar exchange rate. Weekly and quarterly holding period returns are constructed for the period March 1986 through May 1988. Then quadratic and Fourier series approximations to the conditional variances of these yields are estimated. Significant variation in the conditional variances of holding period returns is documented. These results are interpreted in the light of the changing patterns of trading volumes and capital flows between the U.S. and Japan in the 1980s.