[Verse 1] When you look at bond yields across the years There's a curve that tells us what the market hears Short rates today and what they think will come The expectations theory helps us understand this sum [Chorus] Future rates determine the shape we see Pure expectations, that's the key What investors think rates will be Drives the yield curve naturally No risk premium, just expectations free That's how the curve gets its geometry [Verse 2] If short rates are expected to rise up high The long-term yields will follow to the sky Creating an upward sloping line Where longer bonds have higher yields by design [Chorus] Future rates determine the shape we see Pure expectations, that's the key What investors think rates will be Drives the yield curve naturally No risk premium, just expectations free That's how the curve gets its geometry [Verse 3] But when investors think rates will fall down low Long yields drop below where short rates go An inverted curve is what we'll find When falling rate expectations fill their mind [Bridge] Unbiased means no preference shown For short or long, they stand alone Equal returns expected here Across all maturities, crystal clear [Chorus] Future rates determine the shape we see Pure expectations, that's the key What investors think rates will be Drives the yield curve naturally No risk premium, just expectations free That's how the curve gets its geometry [Outro] From steep to flat to inverted lines The market's expectations are the signs Remember this theory when curves you read Future rate beliefs are all you need
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