* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr LONDON, July 6 (Reuters) - Euro zone government bond yields edged up on Tuesday as oil prices rose to their highest levels since 2018 and the Reserve Bank of Australia became the latest major central bank to step back from aggressive pandemic-induced stimulus. 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. That put the focus back on the outlook for inflation, which some believe is set for a sustained push higher globally while others argue is temporary as the economy recovers from the COVID-19 shock. “Market activity is set to pick up with the U.S. returning from holiday amid high-flying oil and likely upbeat macro data,” said Commerzbank rate strategist Christoph Rieger, referring to Monday’s U.S. holiday. “Bund yields remain exposed for now while persistent ECB (European Central Bank) purchases should limit the downside.” In early trade, Germany’s benchmark 10-year Bund yield was up around a basis point at -0.20%, with other 10-year yields in the bloc up a similar amount. Late on Monday, a key measure of euro zone inflation expectations -- the five-year, five-year inflation forward -- rose to about 1.61%, its highest since May 19. The Reserve Bank of Australia meanwhile said it would continue purchasing government bonds past the present September deadline at a weekly pace of A$4 billion, rather than the current A$5 billion until at least mid-November. That slowdown in the pace of purchases is the latest reminder to bond investors that central banks now have their eyes on exiting massive stimulus schemes put in place after the COVID-crisis erupted last year. The German ZEW sentiment survey is released later in the day, while Germany and Austria are expected to sell new bonds. France meanwhile could come to the market with a syndicated bond deal, analysts said. (Reporting by Dhara Ranasinghe; editing by Philippa Fletcher) Our Standards: The Thomson Reuters Trust Principles.