We propose using a Realized GARCH (RGARCH) model to estimate the daily volatility of the short-term interest rate in the euro–yen market. The model better fits the data and provides more accurate volatility forecasts by extracting additional information from realized measures. In addition, we propose using the ARMA–Realized GARCH (ARMA–RGARCH) model to capture the volatility clustering and the mean reversion effects of interest rate behavior. We find the ARMA–RGARCH model fits the data better than the simple RGARCH model does, but it does not provide superior volatility forecasts.