The yield represents a 3.5-point spread on the benchmark 10-year German bonds, whose yield stands at 1.84%.

The retreat comes as after EU-mandated stress tests and asset quality reviews estimated the shortfall at eight Slovenian banks at 4.78bn according to the worst-case scenario.

To recapitalise its three largest banks, which have asked for the transfer of non-performing loans to the bad bank, the government has earmarked EUR 3.01bn.

Both the Slovenian government and European Commission officials have expressed their belief that Slovenia will manage without a bailout in light of these figures.

While investors demanded a yield of around 5% on Slovenian bonds in March, this spiked after Cyprus was bailed out in late March and speculation grew that Slovenia would be the next in line to require international financial aid.

In April, the yield on Slovenian bonds briefly surpassed the 7% rate widely viewed as representing the last still sustainable level of interest for borrowing.

Since then it has only briefly fallen to below 6%, but always rebounded back above the mark.

In recent weeks it has been dropping gradually following positive assessments of Slovenia's efforts to tackle its excessive budget deficit and implement structural reforms by the European Commission.