TREASURIES-Yields drop on weak retail sales data

(Adds quote, details on Greece, updates prices)

* Retail sales drop sparks bond buying

* Greek uncertainty adds to bond bid

* Yellen testimony on Wednesday in focus

By Karen Brettell

NEW YORK, July 14 (Reuters) - U.S. Treasury yields fell on

Tuesday after data showed U.S. retail sales unexpectedly fell in

June, adding to speculation that tepid economic data may lead

the Federal Reserve to wait longer before raising interest

rates.

The Commerce Department said retail sales slipped 0.3

percent last month, the weakest reading since February. May's

retail sales were revised down to show them rising 1.0 percent

instead of the previously reported 1.2 percent jump.

The data will increase focus on Fed chair Janet Yellen's

Humphrey-Hawkins (NasdaqGS: HWKN - news) testimony to Congress on Wednesday and

Thursday. Yields had gained after Yellen gave a hawkish speech

on Friday and said she expects a rate hike at some point this

year.

"It certainly doesn't help the cause. Everyone seemed to get

a bit more bearish after Yellen made her comments on Friday,

people are anticipating kind of the same tone going into

tomorrow," said Tom Tucci, head of Treasuries trading at CIBC in

New York.

Benchmark 10-year notes were last up 10/32 in

price to yield 2.41 percent, down from around 2.43 percent

before the data was released. The yields have held in a range

between 2.18 percent and 2.50 percent since the beginning of

June.

The yield curve also steepened as long bonds underperformed,

hurt by bearish technical indicators and heavy corporate supply.

The gap between five-year note and 30-year bond yields

steepened to 153 basis points, from 152 basis

points late on Monday.

Treasury prices also gained on uncertainty in Greece as a

secret International Monetary Fund study showed Greece needs far

more debt relief than European governments have been willing to

contemplate so far.

The IMF's stark warning on Athens' debt was leaked as Greek

Prime Minister Alexis Tsipras struggled to persuade deeply

unhappy leftist lawmakers to vote for a package of austerity

measures and liberal economic reforms to secure a new bailout.

"There is worrying about Greece not doing what it is

supposed to do, or somebody vetoing it, this could go on and on

and on," said Tom di Galoma, head of rates and credit trading at

ED&F Man Capital Markets in New York.

U.S. producer price data on Wednesday and consumer price

data on Friday will also be in focus for signs on whether

inflation is rising to Fed's targets.

(Editing by Meredith Mazzilli and Andrew Hay)