(Updates with flattening of yield curve and comment)

LONDON, Oct 7 (Reuters) - The benchmark 10-year U.S.

Treasury yield rose to 4% for the first time in two months on

Monday, as markets bet against another jumbo rate cut from the

Federal Reserve after Friday's strong U.S. jobs data pointed to

a resilient economy.

The 10-year yield was up 3 basis points (bps) at

4.008%, having risen as high as 4.014% in London trade. It rose

13 bps on Friday, its biggest one-day rise since June 30.

The two-year yield, which is more sensitive to

changes in monetary policy expectations, was up 7 bps to 4.006%,

its highest since Aug. 22. It rose almost 22 bps on Friday, its

biggest daily rise since April.

The closely watched spread between two- and 10-year U.S.

Treasury yields briefly turned negative for the

first time since Sept. 18, the day the Fed cut rates by 50 bps.

Data on Friday showed the U.S. economy added 254,000 nonfarm

payrolls in September, well above the expectations of economists

polled by Reuters.

"Friday's U.S. labour report put paid to U.S. recession

fears and most remaining hopes that the Fed could follow up

September's rate cut with another 50 bps move next month," said

Jane Foley, senior FX strategist at Rabobank.

Markets are fully pricing a 25 basis point rate cut in

November, but see next-to-no chance of a larger 50 bps move,

having seen around a 33% chance of one last week.