(Adds context, details on bonds, risk index)
By Jorge Otaola
BUENOS AIRES, May 21 (Reuters) - Argentine bonds and the country's peso currency strengthened on Tuesday morning as investors warmed to a shock political twist in the country's election race that saw the expected main populist challenger take a back seat on the ticket of an ally.
The peso, one of the weakest global currencies this year, rose over 1% to 44.76 per dollar, while sovereign bonds climbed on average 1.5%. A closely watched J.P. Morgan risk index for the country also fell sharply.
Argentina's S&P Merval equities index also rose.
Argentine markets had wobbled on Monday morning but ended the day on a high as investors digested the news that Cristina Fernandez de Kirchner, a former president who is unloved by global investors, announced on Saturday she would run for vice president not president in elections later this year.
She had been seen as the main likely challenger to market-friendly incumbent Mauricio Macri. She is to run alongside former cabinet chief Alberto Fernandez.
Self-styled populist Fernandez de Kirchner's more contentious policies are expected to be tempered by her more moderate running partner. (Reporting by Jorge Otaola; Writing by Adam Jourdan Editing by Chizu Nomiyama and Alistair Bell)