This paper empirically investigates the determinants of the deviations from fundamental levels of both the IRS and the CRS rates in Korea from the perspective of limits to arbitrage. This study also analyzes the inter-linkages between the swap and bond markets in Korea. To this end, a rolling VAR model is estimated incorporating the CRS rate, the IRS rate and the KTB rate. It is found that the related risk factors and the demand-supply imbalance are significant determinants of the deviations from fundamental levels of the IRS as well as the CRS rate in Korea. Moreover, the CIP deviation in the CRS market plays a role in explaining the deviation from the fundamental level of the IRS rate. There are contemporaneous links among the CRS rate, the IRS rate and the KTB rate, and a CRS rate shock significantly affects both the IRS and the KTB rates.