U.S. govt bonds close lower on equity market rally, tax cut Senate debate

NEW YORK (AFX) - U.S. government bond prices closed lower due to sharp gains in the equities market and uncertainties about the Bush administration's tax cut and the possibility of extra government spending, dealers said.	    The 5-3/8 pct 30-year bond was down 24/32 at 97-24/32 yielding 5.527 pct yielding 5.527 pct, the 5 pct 10-year note was down 13/32 at 100-7/32 yielding 4.967 pct, the 4-1/4 pct 2-year note down 5/32 at 100-4/32 yielding 4.167.	    The June future contract was down 10/32 at 103-20/32. 	    Dealers said the rich valuations of Treasuries made today's selloff sharper, as investors took advantage of a strong surge on Wall Street to liquidate their fixed-interest government securities.	    Marty Mauro at Merrill Lynch said the selling was partly sparked by movements out of the U.S. fixed-income market and into Asian and European bonds by overseas institutional investors.	    He added that the volatility of the U.S. currency is also increasing uncertainty about the profitability of dollar-denominated assets.	    The ongoing debate in the U.S. Senate about the Bush administration's tax cut plan, which is being challenged by Democrats, is also negatively impacting Treasuries.	    "Until we get some clarity on how the fiscal situation develops," bonds are likely to remain under pressure, according to Mauro.	    The possibility of increased spending by the Federal government, as proposed by some members of the Senate, could further decrease the expected revenues for the U.S. budget in years to come.	    Tomorrow's March employment report is also likely to have a big impact on the Treasuries market. Mauro said: "We don't expect to be surprised by the numbers."	    The figures are expected to show growth moderating to 74,000 after non-farm payroll employment rose above expectations by 135,000 in February.	    March's unemployment rate is seen increasing slightly to 4.3 pct after the unemployment rate unexpectedly held steady at 4.2 pct in February.	    The Fed Funds rate was at 5 pct. 

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