GLOBAL MARKETS-Dollar, gov't yields fall on stimulus hopes

*5-year Treasury note yield falls to record low

*"Dancing to tune of quantitative easing"--fund manager

*Dollar falls against major currencies for second day (Adds close of European markets)

By Jennifer Ablan

NEW YORK, Oct 6 (Reuters) - The prospect of more cheap money from world central banks fueled a rally in global bond prices on Wednesday and pushed the dollar to a 15-year low against the yen and an 8 1/2-month low against major currencies.

U.S. Treasuries, German bunds and Japanese Government Bonds extended their price gains as weak economic data bolstered speculation that governments will take additional actions to reinvigorate the global economic recovery.

Speculation the Federal Reserve will engage in another round of "quantitative easing" -- effectively printing money to buy assets -- intensified after a report showed a drop in private U.S. payrolls last month. Moreover, the Bank of Japan on Tuesday cut interest rates close to zero and said it would pump cash into Japan's financial system through asset purchases. [ID:nTOE69305D]

Investors also piled into gold, a favorite safe haven, pushing the yellow metal to another record above $1,345 an ounce, while copper powered to its highest in more than two years on the weakening dollar.

The Dow Jones industrial average and the benchmark Standard & Poor's 500 index were little changed.

"Investors continue to dance to the tune of quantitative easing and its intended inflation of asset prices," hedge fund manager Doug Kass of Seabreeze Partners, told clients.

Benchmark 10-year notes <US10YT=RR> were yielding 2.36 percent, down from 2.47 percent late on Tuesday, after an ADP Employer Services report showed private payrolls unexpectedly contracted in September. The yield fell as low as 2.38 percent, the lowest since January 2009.

The five-year note <US5YT=RR> yield hit a record low of 1.12 percent.

The December Bund future <FGBLc1> touched a session high of 132.04 as well after the ADP employment data.

Private employers cut 39,000 jobs in September, the largest monthly loss since January, the report said. Analysts had forecast a rise of 24,000 jobs.

"It is definitely a disappointing number and confirms the jobless recovery that we were all fearing," said Nick Kalivas, senior equity index analyst at MF Global in Chicago.

Kalivas said the data was "one of the reasons why people believe the Fed is willing to essentially expand its quantitative easing program."

BOJ SPARKS WORLD STIMULUS HOPE

Speculation of more easing around the world has grown since the Bank of Japan on Tuesday cut interest rates close to zero and said it would pump cash into Japan's financial system through asset purchases.

Moreover, Chicago Fed President Charles Evans was quoted on Tuesday as saying the central back should conduct "much more" monetary easing. [ID:nN05203033]

The pan-European FTSEurofirst 300 <.FTEU3> index of top shares closed up 0.46 percent at 1,070.68 points, while Japan's Nikkei 225 index <.N225> rose 1.81 percent.

The MSCI world equity index <.MIWD00000PUS> rose 0.61 percent.

The Dow Jones industrial average <.DJI> was down 1.02 points, or 0.01 percent, at 10,945.59. The Standard & Poor's 500 Index <.SPX> was down 2.17 points, or 0.19 percent, at 1,158.59. The Nasdaq Composite Index <.IXIC> was down 19.74 points, or 0.82 percent, at 2,380.02.

The standout performers were U.S. Treasuries.

The benchmark 10-year U.S. Treasury note was up 30/32, with the yield at 2.36 percent, and the 2-year U.S. Treasury note <US2YT=RR> was up 1/32, with the yield at 0.38 percent. The 30-year U.S. Treasury bond <US30YT=RR> was up 1 27/32, with the yield at 3.64 percent.

Conversely, the dollar was down against major currencies, with the U.S. Dollar Index <.DXY> off 0.50 percent at 77.364 from a previous session close of 77.749.

The euro <EUR=> was up 0.72 percent at $1.39 from a previous session close of $1.3832. Against the Japanese yen, the dollar <JPY=> was down 0.44 percent at 82.84 from a previous session close of 83.210.

U.S. light sweet crude oil <CLc1> fell early in the session but reversed and was up 0.88 percent at $83.55 a barrel. The Reuters/Jefferies CRB Index <.CRB> was up 1.24 points, or 0.43 percent, at 289.66. (Additional reporting by Naomi Tajitsu, David Gaffen, Simon Falush and Amanda Cooper; Editing by Kenneth Barry)