The Government of Canada Zero Coupon Yield curve is shown below. What does the shape over the first three years tell you about the market's consensus expectation for future spot interest rates?
Yields on Zero Coupon Bonds
1) Expected spot rates will be lower than the current one year spot rate
2) Expected spot rates will be higher than the current one year spot rate
3) Expected spot rates will be the same as the current one year spot rate
