Investors add to bets on Bank of England rate hikes

LONDON, April ​29 (Reuters) - Investors ⁠upped their bets on Bank ​of England interest rate hikes later this year as oil prices jumped ​on ‌Wednesday, a day before the BoE is expected to keep borrowing ⁠costs on hold as it awaits ⁠clearer signs of the Iran ​war's economic hit.

Interest rate futures were pricing around 75 basis points of increases - equivalent to three quarter-point hikes to the BoE's benchmark ​Bank ‌Rate - by December, up from about 63 bps on Tuesday. A first hike was fully priced for July.

Oil prices jumped on Wednesday and the Brent contract hit a one-month ​high on reports that the U.S. will extend its ‌blockade of Iranian ports and that President Donald Trump had rejected an Iranian proposal about the ‌Strait of Hormuz.

"Rising crude prices have produced an immediate response in frisky fixed income markets," said Neil Wilson, strategist at Saxo ​UK. "The Bank of England is walking a tightrope but I expect it to ‌leave rates unchanged (on Thursday) with perhaps two hawkish dissenters possible."

Ten-year gilt yields recorded their highest closing level since July 2008. For ⁠20- ⁠and 30-year bonds, yields closed at their ‌highest since mid-1998, according to LSEG data.

Two-year gilt yields - which are sensitive ​to speculation about ​changes to Bank Rate - closed about 11 ‌bps higher on the day at 4.56%, the highest since March 20.

German two-year bunds were up by about 9 bps. (Writing by Andy Bruce Editing by William Schomberg)