Lawmakers rejected May's Brexit divorce deal late on Tuesday by a crushing margin, pushing Britain's gilt yields up seven basis points to 1.32 percent.
The sharp rise in gilt yields, which analysts said may reflect expectations for a softer Brexit, weighed on the euro zone's higher-rated bond markets.
In Italy, bonds yields fell as much as seven bps, with 10-year yields hitting almost two-week lows at 2.80 percent .
Italy raised 10 billion euros ($11.4 billion) in its biggest ever syndicated bond sale on Tuesday, drawing total investor orders of more than 35.5 billion euros, according to a lead manager at one of the banks that helped sell the debt.
Demand for the new bond was buoyed by the resolution last month of a protracted row between Rome and the European Commission over Italy's budget.
"The Italian syndication went very well and the good performance of Italian bonds gives a lot of confidence for investors to come back to the market," said Ciaran O’Hagan, rates strategist at Société Générale. "Brexit is a sideshow."
Italy's solid debt deal, its first bond sale via a syndicate of banks in a year, also lifted sentiment towards southern European bond markets.
Spain's 10-year bond yield fell 2 bps to 1.37 percent , pushing the gap over benchmark German bond yields to 113.40 bps - its tightest in almost three weeks .
The Portuguese/German 10-year bond yield gap was also at its tightest since late December, narrowing to around 140 bps .
SPOTLIGHT ON GILTS
German 10-year bond yields for instance rose 3 bps on the day to 0.24 percent.
"Clearly there was a lot of pessimism in the market ahead of the Brexit deal vote, so after the vote I did expect gilt yields to move higher," said Pooja Kumra, European rates strategist at TD Securities in London.
"But there is still a lot of uncertainty and this move in gilts is likely to be short-lived."
Theresa May's government faces a no confidence vote in parliament later on Wednesday.
Still, Goldman Sachs strategists said in a note that Tuesday's defeat signals the prospect of a disorderly "no deal" Brexit has receded with a greater probability of an extension to the end-March deadline.
The euro zone's economy is not heading for a recession but still needs support from the ECB as its slowdown could last longer than expected, Draghi said.
($1 = 0.8773 euros)
(Reporting by Dhara Ranasinghe; Additional reporting by Virginia Furness; editing by John Stonestreet and Susan Fenton)