Bund yields at 15-year high, traders price in three ECB hikes by September

* French OAT yields hit their highest since 2009

* UBS now forecasts ECB rate hikes in June and September

* The Italian=German yield spread widens to 100 basis points (Adds comments in paragraphs 10-11)

By Stefano Rebaudo

March 27 (Reuters) - Euro zone benchmark Bund yields hit their highest in 15 years on Friday, climbing above 3% as money markets fully priced in three European Central Bank rate hikes, despite Donald Trump extending a deadline for Iran to reopen the Strait of Hormuz. Markets have increased bets on ECB tightening since the start of the Iran war on February 28, anticipating a rapid central-bank response to oil-driven inflation pressures. ECB President Christine Lagarde's warning that energy disruptions could last for years added pressure on long-dated bonds and reinforced expectations of higher rates for longer. Expectations for a swift return to normal may be overly optimistic, she said on Thursday. Traders on Friday fully priced in three 25-basis-point ECB rate hikes by September and a 60% chance of a first move by May. The depo rate is currently 2% and the ECB meets next at the end of April. Trump said he would pause threatened attacks on Iranian energy plants for 10 days until April 6 at 8 p.m. ET (0000 GMT on April 7).

"We think the ECB, like us, is expecting an initial inflation wave, starting with gasoline prices, followed by knock-on effects on transportation costs, food prices and other industrial products," said Carsten Brzeski, head of macro strategy at ING.

"As long as this remains a single, time-limited wave, there is no need for ECB rate hikes." German 10-year Bund yields, the euro zone benchmark, were up 5.5 bps at 3.11% after hitting 3.13%, their highest since May 2011. They were set to end March 47 bps higher, the biggest monthly rise since December 2022. "The ECB ?might hike rates more than just twice and it might also consider rate steps of 50 bps," said Reinhard Cluse, chief European economist at UBS, referring to a "severe scenario" with inflation rising up to around 6% in the next months. UBS now expects rate hikes in June and September, taking the depo rate to 2.5%. German two-year yields have also surged, up 71.5 bps this month, the most since August 2022. Weak demand at recent government bond sales has added to pressure. Treasury and Bund auctions have drawn far fewer bids than prior months. The last 10-year Bund auction on March 11 saw the poorest demand since October, which itself was the weakest in several years.

FRANCE YIELDS AT THEIR HIGHEST SINCE 2009 Long-dated French bonds have been among the hardest hit given the country's reliance on energy imports and its more fragile public finances. Debt-heavy countries face the most strain in a higher-for-longer rate environment, which would push up debt servicing costs. French 10-year OAT yields hit their highest since June 2009 at 3.889%, up 8 bps.

Italy's 10-year yield was 4.12%, up 10 bps. It touched 4.1420 earlier, the highest since July 2024. The gap between Italian and German 10-year yields stood near a nine-month high at 99 bps, after hitting 100 bps earlier in the session. (Reporting by Stefano Rebaudo. Editing by Arun Koyyur and Mark Potter)