The analysis of factors that determine the level of interest rates paid on treasury bills in Slovenia

The Slovenian ministry of finance started to issue treasury bills regularly in 1998. Above all, it has been guided by a long-term interest to develop the money market although the financing ofhquidity and short-term deficit has also been important factor. A developed money market would not only be a benefit for the government in terms of providing cheaper and more flexible borrowing, but it would also help create conditions for a more transparent interest rate policy and a more effective liquidity management of all market participants. It would also provide a short-term risk-free instrument for the public to invest in. This paper presents the econometric evidence of determinants of the interest paid on three-month treasury bills and the influence the analyzed rate plays on the bond market. The identification of these factors and formation of the proper model can be applied to forecast the three-month treasury bill rate and to improve the efficiency of the government's borrowing policy.