The yield curve hasn’t been this flat in more than seven years.

The spread between two-year and 10-year Treasury yields narrowed on Wednesday to its tightest level since late 2007 as a bond investors read a stronger-than-expected report on U.S. manufacturing-sector activity as supporting the Federal Reserve’s case for raising interest rates as early as this summer.

“Treasurys are floundering toward the middle of the curve. However, they are selling the short end, and buying the extreme long end. For those who don’t see the forest for the trees, that’s in preparation for a rate hike,” said Stephen Guilfoyle, managing director of floor operations at Deep Value Execution Services, in a note.

The Treasury yield curve is a line plotting the yields of different maturities of government debt. The line typically curves upward as investors demand extra yield to hold debt for longer periods. The shape of the curve is closely watched as a gauge of expectations about the economy and monetary policy.

The spread between two-year Treasury notes and benchmark 10-year bonds narrowed to 92.2 basis points at one point after the release of the Institute for Supply Management’s manufacturing index. The ISM’s manufacturing index rose to 51.3% last month from 50.8% in April. That’s the narrowest spread between the two securities since Nov. 29, 2007.

Yields rose after Wednesday’s data, with the sharpest upward move seen in short-dated Treasurys, which are typically the most sensitive to the outlook for Fed policy. The shrinking gap between short-term and long-term government yields can indicate, among other things, that investors are bracing for a near-term rate increase.

Yields edged slightly higher later in the session after the Federal Reserve’s beige book—a collection of anecdotes about the economy—showed business leaders in most Fed districts were seeing the same “modest” growth in May that has been a hallmark of the economic expansion.

The two-year note TMUBMUSD02Y, 0.141% added 2.8 basis points to 0.903% in recent trade. A basis point is equal to a hundredth of a percent.

The yield on the 10-year note TMUBMUSD10Y, 0.701% rose 1.1 basis points to 1.844%, while the 30-year yield TMUBMUSD30Y, 1.454% is down about half a basis point at 2.624%.

“In my view, [The ISM report] is one more data point that makes it easier for the Fed to tighten. But Friday’s labor report will be critical for the Fed if they actually want to pull the trigger,” said Larry Milstein, managing director of government and agency trading at R.W. Pressprich & Co.

Ten-year Treasury prices rose Wednesday, nudging yields down, as investors remained divided about the precise timing of the next rate increase, as well as its potential impact on the bond market.

On Friday, yields saw their largest daily jump in two weeks after Yellen said another rate increase could be appropriate in the coming months, echoing comments from a number of Fed members before her remarks. Demand for existing Treasurys tends to fall amid heightened expectations for higher rates, driving yields higher. Prices move inversely to yields.

Recent Treasury buying implies that investors are split in their thinking about the possible fallout of another rate increase. Some believe yields could retreat after the hike, if it precipitates another sharp selloff in risk assets similar to one that followed the previous Fed hike in December. Some expect the conventional wisdom to play out—that yields will rise as investors price in the higher rates across Treasury maturities.

“Is the market rethinking Yellen’s words? Or rather, as is our take, she hardly said anything really new other than if data continue to look OK they probably will go in the next few months. Surprise?,” said David Ader, head of government bond strategy at CRT Capital Group.

A clearer picture of the Fed’s policy strategy could emerge next week, when Yellen is again expected to speak. The Fed’s next two-day policy meeting begins June 14.

The market was most recently pricing in a 23% probability of a rate increase in June, and a 59% chance of an increase in July, based on the CME Group’s FedWatch tool. Odds of a rate increase in September are 64%.

“There are two thematic trades right now: one is July, not June. The other is September, note July,” said Guy LeBas, chief fixed income strategist at Janney.