UK PM Theresa May lives to fight.......>

BOND SUMMARY: UK PM Theresa May lives to fight another day having defeated a no

confidence motion by 200-117. While this has reduced the additional uncertainty

and complexity thrown up by the leadership challenge, the result has not altered

the set of possible outcomes or made any path more likely.

- Gilts have rallied with the long-end outperforming. The 2s10s spread has

traded down to 50.97bps from a high of 53.6bps, while the 30-year gilt yield

trades at 1.775% down from 1.842%.

- US TSYs have rallied since 0830GMT with yields at the longer end down 2bps.

- JGB futures trade at 151.64, near the high's of the day.

- German bunds sold off during the first hour of trading, but have since pared

losses. Stronger gains at the longer end has seen the 2s10s trade down to

83.8bps from 85.2bps.

- Italian BTPs have rallied following confirmation from PM Conte that the

government will propose a 2.0% budget deficit for 2019. The 3-year has

outperformed the curve, with the yield down 14.5bps.

- Euro$ futures are down 1.0 tick, Euribor down 0.5-1.5 ticks.