Abstract: It is of great significance to correctly identify the linkage between domestic financial market and external market. Using treasury bonds market as an entry point and applying sub-period regression and Markov switching regression, this paper analyzes structural change of treasury market interest rate linkages between China and US. Before 2006, China′s interest rates with different terms were independent of that of the US, but after 2006, the relationship has transformed into “short-term is independent, long-term is associated”, which means that China′s monetary policy has had no “complete” independence; while affirming floating exchange rate can reduce the pressure that domestic short-term interest rate must follow the change of interest rate in US, such a structural change may partly support the mechanism of “Dilemma” or “Global Financial Cycle”, emphasizing that no matter how the exchange rate system changes, more capital openness will strengthen the relationship of domestic and international financial conditions. Therefore, we should strengthen the impact of monetary policy on medium and long-term interest rates, pay attention to the application of macro- prudential policy, rationally use capital flow regulation, and actively participate in international monetary policy cooperation.

Key words: interest rate linkages, monetary policy autonomy, capital openness, macro-prudential policy