(Updates prices) * Benchmark 10-year note yields lowest since Oct. 31 * Government debt rallies on ECB rate cut expectations * Fed buys $463 mln bonds due 2025-2030 * Short-covering helps rally, yields dip below recent range By Karen Brettell NEW YORK, May 14 (Reuters) - U.S. Treasuries yields fell to six-month lows on Wednesday, breaking out of a recent range, as expectations the European Central Bank will cut interest rates sparked a global fixed-income rally. The ECB is preparing a package of policy options for its June meeting, including cuts in all its interest rates, and targeted measures aimed at boosting lending to small- and mid-sized firms (SMEs). A dovish ECB has helped hold down yields on German and U.S. government debt. The bonds' yield moves are often correlated even though the U.S. is seen as poised for stronger growth than Europe, which many expect will eventually send Treasuries yields higher. "It reinforces the notion that from a global perspective monetary policy is forward committed to lower for longer," said Ian Lyngen, a senior government bond strategist at CRT Capital in Stamford, Connecticut. Short covering by investors who had bet that U.S. yields were set to rise, or at least hold in their recent range, added to Wednesday's rally. "We've broken out of the range that we've been in for quite some time," said Rick Klingman, a Treasuries trader at Societe Generale in New York. "Globally there's a fixed income rally going on ... people that thought the range would hold are being forced out of those positions." Benchmark 10-year Treasuries yields fell as low as 2.525 percent, the lowest since Oct. 31, breaking below resistance at around 2.56 percent. The notes' yields have oscillated between 2.57 percent and 2.82 percent as investors analyzed data for signs of how soon the Federal Reserve might begin raising rates, which many expect to be next year. Thirty-year bonds gained 1-4/32 in price to yield 3.389 percent, down from 3.454 percent late on Tuesday. U.S. Treasuries gained even after data showed that U.S. producer prices posted their largest increase in 1-1/2 years in April as the cost of food and trade services surged. The Labor Department said on Wednesday its seasonally adjusted producer price index for final demand rose 0.6 percent, the biggest gain since September 2012. Producer prices increased 0.5 percent in March. Manufacturing surveys and weekly jobless claims will be perused on Thursday for a picture on the strength of the U.S. economy, with housing data due on Friday. The Consumer Price Index for April on Thursday will also be watched for signs that price pressures are increasing. Low inflation is seen as complicating the Fed's ability to raise interest rates unless there are signs that inflation will rise back to the Fed's 2 percent target. The Fed bought $463 million in notes due from 2025 to 2030 on Wednesday as part of its ongoing purchase program.