(Bloomberg) -- Key US Treasury yields are back at 4%, a level not seen since August, after a blowout jobs report forced traders to reassess the outlook for monetary policy.

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Bonds dropped Monday, extending a plunge late last week after surprisingly robust September payrolls data undercut chances for another big reduction in interest rates from the Federal Reserve. The 10-year yield rose four basis points to 4.01%, while the two-year yield was up eight basis points to 4%.

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The moves reflect swirling doubts over the Fed’s next move. Swaps no longer fully price a 25-basis-point reduction for the Fed’s next decision in November, and for the first time since Aug. 1 there are fewer than 50 basis points of cuts implied through year-end.

“We’ve expected higher yields but anticipated a somewhat gradual adjustment,” Goldman Sachs Group Inc. strategists including George Cole wrote in a note. “The extent of strength in the September jobs report may have accelerated that process, with renewed debate on the extent of policy restriction, and, in turn, the likely depth of Fed cuts.”

European bonds followed US Treasuries lower. The German 10-year yield rose four basis points to 2.25%, the highest in over a month, while its UK equivalent rose six basis points to 4.19%.

Bond Traders Buckle Up for ‘No Landing’ After Jobs Surprise

The selloff following Friday’s jobs data is just the latest twist in a year that’s forced investors to recalibrate their expectations for the economy and Fed policy numerous times. US services activity also caught traders off guard last week, exceeding all forecasts, and casting further doubt on theories that the economy was deteriorating more rapidly than feared.

The underperformance in shorter-dated US Treasuries, which are more sensitive to monetary policy, has left a key part of the yield curve on the brink of inverting once again. Historically, bond yield curves slope upward with longer notes paying higher yields, a norm that was disrupted for almost two years as the Fed hiked rates aggressively. The curve started to normalize last month, with two-year yields falling back below 10-year ones.

Traders are looking ahead to a series of speeches from Fed policymakers for further clues on the path for rates. Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, St. Louis Fed President Alberto Musalem and Fed Board member Michele Bowman speak at different events on Monday.

The market is also awaiting US inflation data later this week. The consumer price index is seen rising 0.1% in September, its smallest gain in three months. Fed Chair Jerome Powell has said projections issued by officials, alongside their September rate decision, point toward quarter-point rate cuts at the final two meetings of the year.

“It doesn’t need a recession to get inflation to tolerable levels, so the Fed is easing policy without waiting for genuine economic weakness,” said Dario Perkins, managing director at TS Lombard. “By now, everyone should have realized the Fed is cutting rates pre-emptively.”

(Updates with Fed pricing in paragraph three.)

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