* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Recasts, adds details, updates prices) May 31 (Reuters) - Euro zone bond yields climbed on Monday, but kept well below recent highs, as a rise in German inflation further above the ECB’s target in May failed to weaken support to bond markets from the recent dovish turn of the bloc’s central bankers. Though yields started the week higher, they stayed far below recent highs, as expectations of a dovish tone from the European Central Bank at its June 10 meeting continued to drive the market. Bond yields rose sharply earlier in May driven by a brighter economic outlook, prompting speculation the ECB may slow its pandemic emergency bond purchases (PEPP). But comments from ECB President Christine Lagarde and other policymakers that it is too early to remove the support have brought down bond yields. Inflation has been bond investors’ key focus this year, driven higher by pent-up demand and supply constraints as economies re-open, and whether it will be transitory as central bankers argue. German inflation in May rose 2.5% year-on-year, the highest since 2011, data showed on Monday, accelerating further above the ECB’s “close to but below 2%” target and above expectations in a Reuters poll. But the EU-harmonised figure rose 2.4% year-on-year, slightly below expectations in a Reuters poll. Earlier in the session, data showed Spanish inflation at the highest since 2017, while the Italian reading remained more subdued, as expected. Germany’s 10-year yield, the benchmark for the bloc, was up nearly 2 basis points to -0.17% by 1242 GMT, around levels it had risen to earlier in the session. Yields rose as a key gauge of long-term euro zone inflation expectations climbed above 1.60% for the first time in nearly two weeks. Rainer Guntermann, rates strategist at Commerzbank, told clients that with core euro area inflation, which strips out volatile food and energy costs, likely to remain below 1% on Tuesday, ECB sentiment was unlikely to change. A Reuters poll predicts it at 0.9%. But with Monday’s data showing the range of potential inflation drivers in full swing, the ECB won’t be able to avoid the question of when it will taper PEPP for long and the discussion will gain momentum over the summer and after, according to Carsten Brzeski, global head of macro at ING. Italy’s 10-year yield, meanwhile, was up less than a basis point to 0.92%, keeping the closely watched gap between Italian and German 10-year yields at 108 bps, the lowest in over two weeks. . Further dovish commentary came from ECB policymaker and Bank of Italy governor Ignazio Visco on Monday, who said economic recovery prospects in the euro zone remained uncertain and the ECB would counter any strong rises in interest rates that were not justified by economic conditions. (Reporting by Yoruk Bahceli Editing by William Maclean and Mark Potter) Our Standards: The Thomson Reuters Trust Principles.