TREASURIES-Bonds gain as investors wait on French election

(Adds comments from Fed's Fischer, Trump on tax, updates

prices)

* French elections, U.S government spending in focus

* Trump says tax cuts will be announced next week

* Treasury to sell $88 bln notes next week

By Karen Brettell

NEW YORK, April 21 (Reuters) - U.S. Treasury debt prices

gained on Friday ahead of Sunday’s presidential election in

France, with no major U.S. economic releases due to set market

direction.

Benchmark 10-year note yields have held in a tight range

since falling to five-month lows on Tuesday, as investors await

a catalyst to determine if bonds will continue their rally.

Opinion polls suggest that France’s election will likely

come down to a second-round duel between independent centrist

Emmanuel Macron and Marine Le Pen (Other OTC: PENC - news) , head of the anti-European

Union and anti-immigrant National Front.

“It looks like the market’s getting a little worried about

the French results this week, possibly too strong a showing by

Le Pen,” said Aaron Kohli, an interest rate strategist at BMO

Capital Markets in New York.

Ten-year notes gained 4/32 in price to yield

2.23 percent. The 10-year yield briefly dipped to 2.165 percent

on Tuesday, the lowest since Nov. 10, and has tumbled from 2.63

percent on March 14.

The notes have struggled to hold below strong technical

resistance at yields of around 2.19 percent.

Bonds prices have been boosted in recent weeks by reduced

expectations that the Federal Reserve will raise interest rates

two more times this year, following disappointing economic data

releases.

Still, Fed Vice Chair Stanley Fischer said on Friday that

two more U.S. rate increases this year remain an appropriate

plan for the Federal Reserve despite some weak recent economic

data.

Investors have also been losing hope that President Donald

Trump's administration will achieve passage of fiscal or tax

reforms in the near term.

Bonds pared price gains after Trump told the Associated

Press that he will unveil a tax plan next week that includes

"massive" tax cuts for individuals and businesses.

Congress next week will need to pass a short-term spending

bill or risk a government shutdown, which would likely further

reduce expectations of near-term rate increases.

“They could shut down the government and if that happens the

data the Fed is going to need starts to look pretty sparse,”

said Kohli. “If the government shuts down, June is off the

table.”

Futures traders are pricing in a 49 percent chance the U.S.

central bank will raise rates at its June meeting, down from 71

percent on April 6, according to the CME Group (Kuala Lumpur: 7018.KL - news) ’s FedWatch Tool.

The U.S. Treasury Department will sell $88 billion in

two-year, five-year and seven-year notes next week.

(Editing by Steve Orlofsky)

)