The Treasury prices most sensitive to Federal Reserve monetary policy sank on Friday, putting the 3-year yield on track for its highest close since September. The 3-year note (3_YEAR) yield, which rises as prices fall, was up 4 basis points on the day at 0.939%, its highest since last fall on a closing basis, according to Tradeweb. The yield climbed as high as 0.962% in morning trade, the highest on a closing basis since May 2011.

Even as long-term Treasurys rallied during the spring, sending benchmark yields to an 11-month low, intermediate-term yields remained elevated above levels from last year. Now, investor jitters about when and how the Fed will raise its key lending rate are returning, sending those yields sharply higher.

The nervousness follows a speech late Thursday by Bank of England Gov. Mark Carney, who suggested the central bank may need to raise rates before the market currently expects. That carried across the Atlantic, where some market participants wondered whether the Fed may send the same signals after it meets next week.

“It’s pretty much all on Bank of England’s Carney coming out with what the market perceived as a fairly hawkish statement,” said Michael Pond, head of global inflation-linked research at Barclays.

The British pound strengthened sharply against the dollar on Carney’s comments.

Economic data in the U.S. has shown steady improvement in the labor market and a modest rise in inflation as growth rebounded from a first-quarter pause. As economic data improves, the bond market may price in earlier rate hikes, pressuring the Fed to raise rates earlier. That would be a return to some of the yield curve movements seen at the beginning of the year (from the archives: Investors bet on rate hikes as bond market tests Fed).

Others saw the U.S. market impact of Carney’s comments as fleeting.

“The UK is in an odd situation where they are concerned about the housing market. In contrast, the housing market in the U.S. has not been as strong,” said Kathy Jones, fixed-income strategist at Charles Schwab. “I think there’s a pretty big difference, and I think the market can shrug that off when we talk about the U.S.”

The 5-year Treasury note (5_YEAR) yield rose 4 basis points on the day to 1.701%, while the 30-year bond (30_YEAR) yield rose slightly to 3.410%, narrowing the difference between intermediate and long-term yields, in what’s known as a flattening yield curve. The curve was near its flattest since 2009.

The 10-year Treasury note (10_YEAR) yield was up 2 basis points on the day at 2.604%.

By Ben Eisen