* U.S. retail sales post surprise drop in June * Nagging worries about Europe feed safety bids * Eyes on Fed's Bernanke for clues on QE3 * U.S. Fed to buy $1.5-$2.0 bln longer-dated bonds By Richard Leong NEW YORK, July 16 (Reuters) - U.S. government debt prices rose on Monday, with longer-dated yields flirting with historic lows, after data showing a surprise drop in domestic consumer spending fed bets a faltering economy wou ld more nee d stimulus from the Federal Reserve. Safe-haven demand for Treasuries was also supported by a decision from Germany's high court to delay its ruling on whether the euro zone's richest member can legally ratify Europe's permanent bailout scheme and the pact for fiscal discipline. This drawn-out legal process fed worries about European leaders' ability to manage their debt crisis, as borrowing costs for Spain, Italy and other struggling members of the euro-bloc hover at unsustainable levels. "There is no compelling story in the horizon that compels a bear story on bonds," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennesee. On unusually light trading volume, benchmark 10-year Treasury notes were trading up 10/32 in price at 102-22/32 for a yield of 1.457 percent, down 3.4 basis points from late on Friday. Earlier, the 10-year yield touched 1.449 percent, within striking distance of the 1.442 percent which was the lowest level going back to the early 1800s, according to data compiled by Reuters. The 30-year bond last traded 1-2/32 higher at 109-26/32 with a yield of 2.529 percent, almost 5 basis points lower than Friday's close. The 30-year yield set a session low of 2.524 percent, close to a record low of 2.510 percent record on June 1. Treasury yields could probe even lower as further economic deterioration intensifies speculation the Fed will soon embark on more bond purchases to stimulate the economy, analysts said. A number of Fed officials recently seem to have laid the groundwork of more action from the U.S. central bank, although a few of them cautioned a third round of quantitative easing, nicknamed QE3, would be less effective than the previous rounds. Traders will monitor Fed Chairman Ben Bernanke's testimonies before two separate Congressional committees on Tuesday and Wednesday. They will scour for signs on whether the Fed is preparing for QE3 soon. In the meantime, the Fed has been buying bonds in the open market with its Operation Twist that involves selling its short-term debt and buying longer-dated Treasuries. On Monday, the Fed is scheduled at 11 a.m. (1500 GMT) to buy $1.5 billion to $2.0 billion in U.S. government debt that matures in Aug 2022 to Feb 2031.