LONDON, June 13 Reuters Shortdated British government bond prices plunged on Tuesday to new 15year lows as investors leant heavily into bets that the Bank of England will keep on raising interest rates, following unexpectedly strong labour market data.

British bond yields which move inversely to the price have soared in response to recent figures that point to entrenched inflation pressure in the economy.

The twoyear gilt yield rose to 4.847, its highest level since August 2008 and surpassing a peak hit during September39;s market meltdown triggered by the economic agenda of former prime minister Liz Truss, after it was presented in what was dubbed the minibudget. As of 1210 GMT, it stood 17 basis points higher on the day at 4.81.

Official data on Tuesday showed British wage growth soared and employment also jumped in the three months to April, while incoming BoE ratesetter Megan Greene said the BoE would need to lean against signs of inflation persistence.

Gilts remain vulnerable amid strong inflationary pressures, said Althea Spinozzi, senior fixed income strategist at Saxo Bank. We see scope for 2year yields to rise towards 5, testing a critical level that might provoke volatility across markets.

Investors ramped up expectations for the peak in BoE rates to 5.75 by the year39;s end from their current level of 4.5. On Monday, they had priced in a peak of 5.5, based on the overnight index swap curve.

It now shows a 32 chance that the BoE will raise interest…