  The simplest field theory description of the multivariate statistics of
forward rate variations over time and maturities, involves a quadratic action
containing a gradient squared rigidity term. However, this choice leads to a
spurious kink (infinite curvature) of the normalized correlation function for
coinciding maturities. Motivated by empirical results, we consider an extended
action that contains a squared Laplacian term, which describes the bending
stiffness of the FRC. With the extra ingredient of a `psychological' future
time, describing how the perceived time between events depends on the time in
the future, our theory accounts extremely well for the phenomenology of
interest rate dynamics.
