* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds details, updates prices) LONDON, July 6 (Reuters) - Government bond yields across the euro area fell to their lowest levels in at least three weeks and safe-haven German bonds showed their best performance since March on Tuesday as caution surrounding the global economic outlook crept in. The spread of the more infectious Delta coronavirus variant has led some countries to delay elements of their return to normal life, raising concerns about the impact on economic growth more than a year after the pandemic began. “There is a deterioration in the macro economic outlook and this is playing out in the rates markets,” said ING senior rates strategist Antoine Bouvet. The rally in euro zone bonds intensified after the U.S. session open, which eventually saw the 10-year U.S. Treasury yield - closely correlated with peers in the euro area - fall to its lowest since February, a move analysts attributed to positioning and weak services data. Germany’s 10-year Bund yield fell almost 6 bps on the day - slightly less than U.S. Treasury yields - to as low as -0.271% , its lowest level in around three weeks and its biggest daily fall since March 1. Its 30-year yield fell nearly 8 bps in the biggest daily fall since June 2020. Italian and French 10-year bond yields fell nearly 7 bps to as low as 0.735% and 0.056% respectively , their lowest since April. The balance of risks facing the global economy is more negative than previously, partly because of the global spread of the Delta variant, Deutsche Bank said in its latest House View note. The renewed fall in borrowing costs came as oil prices rose to their highest levels since 2018, with investors confident in a belief that the European Central Bank will keep stimulus in place. Oil prices extended gains to near $80 a barrel after Ministers of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, abandoned oil output talks. A key measure of long-term inflation expectations in the euro area extended its rise to above 1.6481%, its highest since late 2018. “If you look at the move in the price of oil, it’s not as significant as you’d expect it to be at face value given that OPEC+ has been unable to reach agreement to boost output just as demand surges as lockdowns ease,” said Richard McGuire, head of rates strategy at Rabobank in London. “Markets have also been of the mind that inflation is of a transitory nature, higher inflation now means lower inflation later because of its cost-push nature.” Elsewhere, investor sentiment in Germany remained high in July despite a greater-than-expected drop as forecasts for a strong economic recovery rose, the ZEW economic research institute said. In the primary market, France raised 5 billion euros from a new 30-year bond sold via syndication, which received over 28 billion euros of demand, a lead manager said. Reporting by Dhara Ranasinghe, additional reporting by Yoruk Bahceli and the New York markets team; Editing by Philippa Fletcher, Peter Graff, Timothy Heritage and Barbara Lewis Our Standards: The Thomson Reuters Trust Principles.