By 
U.S. Treasury yields were little changed on Tuesday, though the 10-year rate slipped from its highest level since October 2008, as investors welcomed this week’s budget U-turn by the U.K. government.
What’s happening
The yield on the 2-year Treasury
TMUBMUSD02Y,
4.443%
declined 1.9 basis points to 4.435% from 4.454% on Monday.
The yield on the 10-year Treasury
TMUBMUSD10Y,
3.996%
dropped 1.6 basis points to 3.996% from 4.012% on Monday. Monday’s level was the highest since Oct. 15, 2008, based on 3 p.m. figures from Dow Jones Market Data.
The yield on the 30-year Treasury
TMUBMUSD30Y,
4.020%
rose less than 1 basis point to 4.02% from 4.014% on Monday. Tuesday’s level is the highest since Aug. 1, 2011.
What’s driving markets
Treasury yields held relatively steady amid choppy trading on Tuesday after this week’s budget U-turn by the U.K. government helped soothe markets, which had been rattled by fears of broader stress in the fixed-income sector.
Also on Tuesday, U.K bond yields got a temporary boost after the Bank of England disputed a Financial Times report that claimed the bank was set to further delay its quantitative-tightening program. The yield on the 30-year U.K. gilt BX:TMBMKGB-30Y, an important bond to judge the health of the country’s embattled pension-fund system, briefly rose to as high as 4.5%.
U.S. data released on Tuesday showed that industrial output was up 0.4% in September after a revised 0.1% drop in the prior month, while industrial capacity in use rose to 80.3% last month versus 80.1% in August. Confidence among U.S. home builders also fell again in October, marking a 10th consecutive monthly fall.
Markets are pricing in a 95.4% likelihood that the Fed will raise interest rates by another 75 basis points to between 3.75% and 4% on Nov. 2. The central bank is mostly expected to take its fed-funds rate target to at least between 4.75% and 5% by March, according to the CME FedWatch tool.
What analysts are saying
“The new sense of calm emanating from the U.K. has helped spread ripples of optimism across global markets…as concerns about contagion from a bond market meltdown abate,” wrote Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
— Jamie Chisholm contributed to this article.
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