* U.S. 10-year yield lowest in at least 60 years * U.S. 7-year yield touches record low * Longer-dated T-note futures hit contract highs * U.S. April pending home sales unexpectedly drop By Richard Leong NEW YORK, May 30 (Reuters) - The benchmark U.S. Treasury yield fell to its lowest level in at least 60 years on Wednesday as worries of contagion from Spain's ailing banks raised bids for low-risk investments. On Wednesday, the European Commission advocated direct aid from a euro zone rescue fund to recapitalize distressed banks in an effort that could eventually help Spain. Spain's financial woes, rising Italian borrowing costs and uncertainties over the Greek national election in June, sent investors into cash, Treasuries and German Bunds from stocks and other riskier assets. "The European news is not getting any better," said Jeff Given, portfolio manager at Manulife Asset Management in Boston, adding that investors were feeling compelled to chase the rally into longer-dated debt. "There are a lot of people who are short duration. You have to (buy) 10-year and 30-year Treasuries." The latest investor push into longer-dated Treasuries sent 10-year yields to 1.642 percent, which is at least a 60-year low based on monthly figures gathered by Reuters. The yield on 30-year Treasury bonds last traded at 2.74 percent after falling to 2.73 percent, the lowest since October 2011, according to Tradeweb. The heavy demand for perceived safehaven assets also propelled longer-dated U.S. Treasury futures to contract highs and seven-year cash note yield to record lows. U.S. and German government yields declined as the yield on 10-year Spanish sovereign debt rose to six-month highs on concerns over how Spanish banks will obtain capital to stay afloat. "The fundamental question is where the money is going to come from to support the Spanish banks and on what terms," said Jim Vogel, interest rate strategist with FTN Financial in Memphis, Tennessee. While Treasuries and German Bunds rallied on fears of a worsening financial crisis in Europe, global stock markets stumbled with the three major Wall Street indexes falling about 1 percent. On the data front, U.S. pending home sales unexpectedly fell 5.5 percent in April. Analysts had predicted a 0.1 percent increase.