* 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 * Five-year yield hits record low at 0.58 pct * U.S. Fed buys $1.84 bln in longer-dated bonds By Karen Brettell NEW YORK, July 16 (Reuters) - U.S. 10-year bond yields fell to match historic lows on Monday after a surprise drop in retail sales provided the latest evidence of a slowing economy, bolstering bets of new stimulus measures from the Federal Reserve. While the rock-bottom yields are not enticing, most investors remain too nervous about the global economy and financial contagion from Europe to take much risk, analysts and traders said. "Treasuries at these low yields are not great trades. People are just being forced into them," said Brian Edmonds, head of interest rates at Cantor Fitzgerald in New York. The Commerce Department reported that U.S. retail sales fell by 0.5 percent in June, marking a third straight month of decline. Economists had expected a 0.2 percent rise. "Today was certainly a disappointment," said Chris Ahrens, interest rate strategist at UBS in Stamford, Connecticut. Yields on U.S. Treasuries were broadly lower, albeit on unusually light trading volume. Benchmark 10-year Treasury notes last traded up 8/32 in price for a yield of 1.47 percent, down from 1.49 percent late on Friday. Earlier, the yield touched 1.442 percent, matching the level set on June 1, which was the lowest level dating back to the early 1800s, according to data compiled by Reuters. Traders will next be focusing on semiannual testimony from Federal Reserve Chairman Ben Bernanke before two separate Congressional committees on Tuesday and Wednesday. "I wouldn't think that we're going to get any policy announcement, but we're going to get some insight into the thinking of the committee and the board at large," said Ahrens. "It's critical to think about where they stand and how the hawks feel in light of the recent data." A number of Fed officials recently seem to have laid the ground work for more action from the U.S. central bank to kick-start the slowing economy, although a few have cautioned that a third round of quantitative easing, known as QE3, would be less effective than the previous rounds. "Bernanke's testimony will be important for clues about QE3. The Fed is not going to sit idly by," Cantor's Edmonds said. In the meantime, the Fed has been buying bonds in the open market with its Operation Twist program, which involves selling short-term debt and buying longer-dated Treasuries. On Monday, the Fed bought $1.84 billion in U.S. government debt that matures in August 2022 to February 2031. Safe-haven demand for Treasuries was also supported by a decision from Germany's high court to delay its ruling on whether Germany, 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 added to 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. The 30-year bond last traded up 17/32 in price with a yield of 2.55 percent, down from 2.58 percent at Friday's close. The 30-year yield touched a session low of 2.520 percent, within striking distance of a record low of 2.510 percent set on June 1. Among other maturities, the five-year yield hit a record low of 0.5786 percent, while the two-year yield fell to 0.2219 percent, matching its lowest level since Feb. 1, according to Reuters data.