This paper applies a generalized regime-switching (GRS) model to the corporate bond interest rate. The model allows the interest rate to exhibit both mean reversion and conditional heteroskedasticity and nests the popular generalized autoregressive conditional heteroskedasticity (GARCH) and square root process specifications. The conditional variance process accommodates volatility clustering and dependence on the level of the interest rate. A first-order Markov process with state-dependent transition probabilities governs the switching between regimes. Through these we can find out the distribution behaviour of interest rate in our corporate bond market. Also the GRS model is compared with the single regime model and the GARCH(1,1) model in terms of the out-of-sample forecasting performance.