UK gilts underperform versus German debt after Brexit vote

(Adds strategist comment)

LONDON, Jan 16 (Reuters) - British government bonds underperformed versus their German peers when trading started on Wednesday following Prime Minister Theresa May's record parliamentary defeat over her Brexit plans.

March gilt futures opened 30 ticks lower at 122.90, underperforming German Bund futures by around 10 ticks, while five-year gilt yields' spread over similar German debt rose to 130 basis points, its widest since Oct (Shenzhen: 000069.SZ - news) . 19.

Ten-year gilt yields rose 3 basis points on the day to 1.29 percent at 0843 GMT, while two-year yields neared a three-month high at 0.83 percent.

ADM Investor Services market strategist Marc Ostwald said he believed gilts' price weakness represented a reversal of Tuesday's safe-haven demand, plus stronger global share prices, rather than bets on a softer Brexit outcome that would boost British economic growth.

"It would seem we need to do a little bit of unwinding today, especially in the context of a better tone for equity markets," he said.

Markets saw little chance that May would lose a confidence vote in her government due to take place on Wednesday evening, he added, with a greater focus on inflation data due at 0930 GMT.

(Reporting by David Milliken; Editing by Catherine Evans)