* U.S. sells 3-year notes at highest yield in over 3 years
* Weaker German data, stock prices stoke bids for bonds
* Fed's Kocherlakota sees inflation holding below 2 percent
* Fed buys $1.07 billion of Treasuries due 2036-2044
(Updates market action; adds quote)
NEW YORK, July 8 (Reuters) - U.S. Treasuries prices rallied on Tuesday as investors raised stakes in bonds because of stock market losses ahead of corporate earnings, and overseas trade data that fueled worries about global economic growth.
U.S. government debt yields fell for a second day on the notion that last week's report showing hefty job gains in June was not strong enough to spur the Federal Reserve to raise short-term interest rates before the second half of 2015, analysts and traders said.
"The weak wage component offset the stronger-than-expected headlines, so there's nothing to set off the Fed for an earlier rate hike," said Charles Retzky, director of futures sales at Mizuho Securities USA in Chicago.
Minneapolis Fed President Narayana Kocherlakota said the drop in unemployment is welcomed, but the labor market still has a long way to go before the Fed has reached its goals, including achieving a 2 percent inflation target. He added inflation would likely average below 2 percent for the next four years.
This dovish view helped the bond market to hold its gains, driving longer-dated yields further below two-month peaks set on Thursday during an initial bond market sell-off in reaction to the June payrolls data.
The benchmark 10-year Treasuries yield last traded at 2.565 percent, down 5 basis points from Monday, while the yield on 30-year bonds fell nearly 6 basis points to 3.380 percent.
On Wall Street, major stock indexes sagged with the Standard & Poor's 500 index falling 0.7 percent.
Foreign demand for higher-yielding Treasuries also stoked the fall in yields as disappointing German economic data fed expectations the European Central Bank would resort to quantitative easing and lower rates to stimulate the regional economy.
A surprise drop in U.K. factory output raised the hope that the Bank of England might delay plans to increase rates in early 2016, spurring a drop in Gilt yields.
"The bond market is taking its cue (partly) from Europe," said Jeffrey Kleintop, chief market strategist with LPL Financial at a presentation with reporters here. He added the recent disappointing data on Europe would likely help keep a lid on a significant rise in U.S. yields.
The German government said earlier that the euro zone's biggest economy posted larger-than-forecast drops in exports and imports in May, while data showed British factory production in May suffered the biggest fall since January 2013.
The rally in the U.S. bond market was felt at a $27 billion three-year note auction, the first part of this week's $61 billion in fixed-rate supply, selling at a yield of 0.992 percent, the highest in over three years.
Separately, the Fed bought $1.067 billion in bonds due in 2036 to 2043, part of its planned $19 billion Treasuries purchases in July.
(Reporting by Richard Leong; Editing by Meredith Mazzilli and Andre Grenon)