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I am trying to collect data I could use for calibration of a short-rate modeling process, so I need data which represents the historical short-rates.

On the Bank of England webpage I came across the historical Government liability curve data, and also the 3-months UK treasury bills discount rates.

It turns out they are not the same. For example, on the 31 May 2017 the UK nominal 3-month spot rate was 0.04, and the 3-months UK treasury bill discount rate was 0.0575. Also, in the 3-months UK nominal spot rate table, values of 3-months spots are actually mostly not given.

I don't understand what is the difference between these two values, and which ones should I use for my historical data?

Many thanks for any insights on this.

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The Treasury bill rates are actual yields of short-term Treasury bills. More precisely, these are "average rates of discount at the weekly tender for 91 day bills."

By contrast, the spot rates are calculated from theoretical fitted curves. Notable, the government curves use repo rates at the short end, not bill rates. Additionally, these are continuously compounded rates, not discount yields.

It is unlikely that you'll get very different results using either rates. I would opt for repo rates, primarily because the bill mkt in the UK is not particularly liquid.

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  • $\begingroup$ If the BoE uses Repo Rates ... I would follow their example. $\endgroup$
    – Alex C
    Jul 7, 2017 at 22:57
  • $\begingroup$ @AlexC The problem is that the nominal spot rate curves mostly lack in the 3-month rates. $\endgroup$
    – Milan
    Jul 7, 2017 at 23:52
  • $\begingroup$ @Milan Use bill rates for the early periods, and switch to repo rates once they become available? $\endgroup$
    – Helin
    Jul 8, 2017 at 1:03
  • $\begingroup$ @HelinGai Yeah, I think I'm gonna do that. Thanks for help, appreciate it. $\endgroup$
    – Milan
    Jul 8, 2017 at 1:35
  • $\begingroup$ Ok, so I just realized that the 3-month T-bill discount rates are actually only quoted monthly, and I would prefer daily historic data for short-rates. What alternative "risk-free-ish" instruments would you recommend? $\endgroup$
    – Milan
    Jul 8, 2017 at 3:31

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