Treasury yields showed traders’ expectations for prices in the economy are falling this month as investors prepared to bid for $16 billion of five-year Treasury Inflation Protected securities today.

The difference between yields on 10-year notes and TIPS, a gauge of trader expectations for consumer prices over the life of the debt, was 2.14 percentage points. The figure has declined from 2.21 at the end of July and it compares to this year’s average of 2.34. Yields on nominal Treasury bonds extended their advance to a two-year high after minutes of the Federal Reserve’s last meeting said policy makers were “broadly comfortable” with a plan to curtail bond purchases.

“People are getting out of inflation-linked bonds,” said Hideo Shimomura, the chief fund investor who helps oversee the equivalent of $61.3 billion in Tokyo at Mitsubishi UFJ Asset Management Co. “Inflation is completely subdued. When the Fed starts to reduce its accommodation, TIPS should underperform.”

Ten-year nominal bond yields rose two basis points to 2.92 percent as of 11:11 a.m. in Tokyo, according to Bloomberg Bond Trader data. It was the highest level since July 2011. The price of the 2.5 percent note due in August 2023 was 96 13/32.

Japan’s 10-year yield gained 1 1/2 basis points, or 0.015 percentage point, to 0.745 percent today. The nation’s sovereign bonds have returned 1.1 percent in 2013, based on the Bloomberg Japan Sovereign Bond Index.

Comparative Returns

TIPS have fallen 9.4 percent in 2013, the steepest loss since they were first sold in 1997, according to Bank of America Merrill Lynch indexes. Nominal bonds dropped 3.8 percent, the biggest decline based on the indexes, which go back to 1977.

The Standard & Poor’s 500 Index of U.S. shares has returned 17 percent, including reinvested dividends.

Fed officials supported Chairman Ben S. Bernanke’s plan to start reducing their $85 billion in monthly bond purchases this year if the economy improves, with a few saying it might be needed soon, according to the minutes issued yesterday.

Treasury trading volume at ICAP Plc, the largest inter- dealer broker of U.S. government debt, jumped 39 percent to $360 billion yesterday, the highest level since Aug. 15. The figure is down from a 2013 high of $662 billion and compares with the 2013 average of $314 billion.

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