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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, 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’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) )