[Verse 1] Banks and pension funds have different needs Short term cash or long term seeds Insurance companies want bonds that last While money markets move real fast Each investor has their favorite zone Where they feel comfortable and at home [Chorus] Market segments split apart Different players, different hearts Preferred habitat theory shows Where each investor wants to go Supply and demand in each maturity That's what shapes the yield curve we see [Verse 2] Segmented markets theory says it clear Investors stay in their chosen sphere Banks stick to short term treasury bills While pension funds climb longer hills No arbitrage between the zones Each market stands there all alone [Chorus] Market segments split apart Different players, different hearts Preferred habitat theory shows Where each investor wants to go Supply and demand in each maturity That's what shapes the yield curve we see [Bridge] Preferred habitat's more flexible though Sometimes investors will cross and go To other maturities when the price is right But they'll return to their home base sight Institutional constraints hold them tight Regulations guide them left and right [Verse 3] When government issues more ten year debt Supply goes up, prices reset Yields rise in that specific range While other maturities barely change Each segment moves on its own supply Independent forces reach the sky [Chorus] Market segments split apart Different players, different hearts Preferred habitat theory shows Where each investor wants to go Supply and demand in each maturity That's what shapes the yield curve we see [Outro] So when you see that yield curve bend Remember how these theories blend Segmented markets standing strong Preferred habitats all along Each maturity finds its own way In the bond market every day
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