Having faced an unprecedented..........>

GILT SUMMARY: Having faced an unprecedented parliamentary defeat yesterday

(losing the 'meaningful' vote by 230), UK PM Theresa May faces a no-confidence

vote later today. With the Eurosceptic European Research Group bloc and the DUP

signalling support for the PM, tonight's motion should be defeated. However,

there is still no further clarity on the most likely Brexit path. 

- The market has turned a touch bearish, but there does not appear to be a shift

towards no-deal pricing. The FTSE is down 0.5% on the day, cable is holding

above 1.2800 and the gilt sell-off is just a few bps outside normal intraday

ranges.

- Most of the pressure has been at the longer end of the curve with 10-/30-year

yields up 6-7bps on the day. 2s30s has traded up to 100.6bps from 96.9bps. The

Mar-19 gilt future trades at 122.56, near the lows of the day.

- Inflation breakevens have slumped with the 5-year benchmark dropping to 3.173%

from a high of 3.243%.

- The short sterling futures strip has flattened with greens/blues down 4.5-6.5

ticks.