Keynesian liquidity preference function
The answer is that you need to add "liquidity preference", the supply and demand for money.
Theories on bond pricing include classical interest rate theory, liquidity preference theory, loanable fund theory and reasonable expectation theory.
So, according to the expectations theory augmented with liquidity preference — This strongly upward-sloping term structure in 2003 would reflect two things.
The paper then points out a crucial and unsolved mistake in Keynes's liquidity preference theory, i. e. interest rate is indeterminate, which is revealed by introducing finance motive into the theory.
