Even if this doesn't happen, you still don't end up with the command line you probably wanted.
$ echo "$(echo $'ab\ncd\nef')" # enter ab cd ef $ echo "$(echo $'ab\ncd\nef')" # input M-C-e $ echo ab cd ef # enter ab -bash: ef: command not found And yes, that did change my working directory to my home directory. Would it be unreasonable to expect that the argument to the outermost echo after M-C-e still be in double-quotes? Or potentially placed in single-quotes. That way, the line would be evaluated the same way as it would've been without M-C-e. Compare: $ echo $(echo $'ab\ncd\nef') # enter ab cd ef $ echo $(echo $'ab\ncd\nef') # input M-C-e $ echo ab cd ef # enter ab cd ef which was kind of surprising but arguably correct.