* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Add details, updates prices) MILAN/AMSTERDAM, Feb 18 (Reuters) - Euro zone bonds extended their slide on Thursday, with German yields hitting a new eight-month high after a hefty sell-off earlier in the week driven by expectations of rising inflation. Expectations of economic recovery from the COVID-19 downturn and fiscal stimulus in the United States have caused a surge in global bond yields, led by U.S. Treasuries, in recent sessions. After falling just slightly in morning trade, the decline in euro zone bonds gathered paced in the afternoon before cooling down again towards the close. “The market is very thin and the slide may be linked to the fall in U.S. Treasuries,” said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan. ADVERTISEMENT “Even though the U.S. economy and its monetary policy are at very different stages compared to Europe, it seems there is no decoupling. Inflation risks in Europe are remote,” he added. The 10-year German Bund yield surged to -0.323% at one point on Thursday, its highest since June, and before falling down to -0.341% by 1631 GMT. On Wednesday it dipped 1 basis point after rising 11 bps in three sessions. Italy’s 10-year bond yields were at 0.659% after touching 0.674%, the highest since late January, as they climbed further away from the record low hit earlier this month. DZ Bank rates strategist Christian Lenk said minutes late on Wednesday from the Federal Reserve, in which the U.S. central bank displayed willingness to steer past coming inflation, may have “led to some rethinking of market participants that the inflation trade has run a little too far”. He expects the trade to hold up in the longer term, however. The focus was also on the European Central Bank’s January meeting accounts. In the minutes, policymakers highlighted that inflation was still distant from the bank’s target and a strong euro posed additional danger. They were more sanguine about a rise in bond yields, given borrowing costs remain low. But with these factors all previously flagged, the minutes had little market impact, as expected. At its meeting in January the ECB kept its policy rate and stimulus package unchecked, but its messaging had been perceived as hawkish, causing a big sell-off in southern European bonds. Governing Council member Klaas Knot said afterwards that the ECB was ready to cut its deposit rate further below zero if necessary to keep its inflation target in sight. The euro rose to its highest since 2018 above $1.23 in early January. It has eased since to around $1.208 currently . In the primary market, Spain raised 5.11 billion euros ($6.17 billion) via an auction of bonds due between 2024 and 2040, while France raised over 10 billion euros from the sale of bonds due between 2024 and 2029, and held a separate auction for inflation-linked bonds.[ ($1 = 0.8277 euros) (Reporting by Danilo Masoni and Yoruk Bahceli; Editing by Raissa Kasolowsky, Susan Fenton and Alison Williams)