U.S. Treasury Inflation Protected Securities are trailing traditional U.S. securities in 2013 for the first time in five years as the government prepares to sell debt linked to consumer-price increases.

Yields on 10-year notes were little changed as the number of Americans filing claims for unemployment benefits remained steady last week. The spread between 10-year Treasury yields and similar-maturity TIPS, a gauge of inflation expectations known as the break-even rate, shrank to as little as 2.35 percentage points yesterday, the narrowest since Nov. 16. The U.S. is scheduled to sell $18 billion of five-year inflation-linked notes today.

“TIPs have had a rough time recently with the commodities sell-off and renewed fears of deflation -- break-evens are 35 basis points cheaper to where they were a month ago,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “People are again more concerned about deflation than they are about inflation. When that occurs, it will affect this market. It could be a tricky one today.”

The U.S. 10-year yield was 1.70 percent at 8:59 a.m. in New York, according to Bloomberg Bond Trader prices. The rate dropped to 1.67 percent yesterday, the lowest level since Dec. 12.

Jobless Claims

Applications for jobless insurance payments increased by 4,000 to 352,000 in the week ended April 13, in line with the median forecast of economists surveyed by Bloomberg. There was nothing unusual in last week’s data and two states, California and Kentucky, were estimated, a Labor Department official said.

“The claims number was pretty much ham-on-rye,” Rogan said. “It doesn’t give the market much to trade on.”

TIPS investors have gained 0.2 percent since Dec. 31, while nominal debt has returned 0.6 percent, according to Bank of America Merrill Lynch indexes. That puts the index-linked securities on course for the first underperformance since 2008, when they lost 1.1 percent while Treasurys climbed 14 percent.

Five-year TIPS yielded minus 1.55 percent before today’s sale. Investors bid for 2.7 times the amount of securities offered at a previous quarterly auction on Dec. 20, the weakest demand since April 2012.

‘No Inflation’