LONDON, Oct 20 (Reuters) - British government bond prices rose on Thursday although their gains were tempered by the prospect of another week of political upheaval as the Conservative Party chooses a successor to Prime Minister Liz Truss who announced she would resign.
Investors further scaled back their bets on an outsized 1% point interest rate hike next month by the Bank of England. Deputy Governor Ben Broadbent questioned aggressive pricing in markets of future rate hikes in a speech earlier on Thursday.
Twenty- and 30-year gilt yields , which had fallen as much as 13 basis points (bps) earlier in the day, were down 7 bps as of 1442 GMT.
Rate futures markets pointed to an 10% chance of a 100 basis-point increase in Bank Rate on Nov. 3, after the BoE's next meeting, down from around 25% at the start of the day.
"UK financial market reaction to Liz Truss's resignation today has been fairly sanguine," said Daniel Mahoney, an economist at Handelsbanken.
"Going forward, markets will be seeking political stability from the UK Government and will now be looking for a new leader to be selected both speedily and with a broad consensus of parliamentary colleagues."
Reporting by Andy Bruce Editing by William Schomberg