Yesterday evening's indicative votes...>

GILT SUMMARY: Yesterday evening's indicative votes in parliament failed to

produce a majority opinion on how to breach the Brexit impasse. The two motions

garnering the most support were a second referendum and a customs union.

- While the Remain camp has become more optimistic given the scale of support

for a softer Brexit, both sides of the debate will feel that their preferred

option is within grasp, which could motivate MPs to stick to their guns rather

than compromise.

- At the same time, PM May's decision to sacrifice her leadership in a bid to

get her deal passed appears insufficient to placate the DUP and the 20 or so

hardcore eurosceptics in the ERG.

- This all suggests that the risk of no-deal is still under-priced, despite

claims that it is off the table. 

- Gilts have opened strongly this morning. Yields are 2-4bp lower on the day

with the curve steepening on short-end outperformance. Current yield levels:

2-year 0.630%, 5-year 0.756%, 10-year 0.986%, 30-year 1.521%.

- Short sterling futures are 0.5-2.0 sticks higher.