Reflation bets push German yield curve to steepest since March

* German 2s/10s yield curve at steepest since March

* Italian 10-year yields at highest in three weeks

* Risk premium rises from 2015 lows

* Germany to auction 30-year bond with positive yield

AMSTERDAM, Feb 17 (Reuters) - Euro zone bond yields rose further on Wednesday, pushing the German yield curve to its steepest since March 2020.

Expectations of economic recovery from the COVID-19 crisis and extraordinary fiscal stimulus in the United States has pushed global bond yields higher, led by U.S. Treasuries.

With expectations for rising inflation hitting longer-dated bonds harder than shorter ones, yield curves -- often seen as indicators of economic expectations -- have steepend on both sides of the Atlantic.

In the euro zone, the gap between two- and 10-year German bond yields, a closely watched segment of the yield curve, rose to its steepest since March 2020 on Wednesday, at 36 basis points.

Germany's 10-year yield, the euro zone's benchmark, touched its highest since June at -0.331% in early trade.

"The bond market sell-off is developing a dynamic of its own where higher yields lead to higher yields," said Christoph Rieger, head of rates and credit research at Commerzbank in Frankfurt.

"A stronger ZEW or Empire State index just offer more excuses to hedge interest rate risks," he added, referring to data releases a day earlier that both beat expectations.

Focus on Wednesday is on U.S. retail sales and the U.S. Federal Reserve's meeting minutes, which will be under scrutiny given the ongoing rates sell-off.

Attention is also on Italy, where Mario Draghi's newly sworn-in government will present his policy priorities in the Italian Senate, before a mandatory confidence vote in his government of national unity

The appointment of the former European Central Bank chief, who is expected to more effectively implement economic reports than his predecessors, has boosted investor confidence in Italian government bonds.

Italian bond yields also rose further on Wednesday, with the 10-year yield rising to 0.596%, the highest in nearly three weeks.

That pushed the gap between Italian and German 10-year yields -- effectively the risk premium on Italian debt -- up to 92 basis points, compared with around 87 basis points last week, which was the lowest since 2015.

In the primary market, Germany will re-open a 30-year bond, which will offer a positive yield for the first time in almost a year, according to Commerzbank's Rieger.

After rising to positive territory on Feb. 4, 30-year German bonds now yield 0.17%, underperforming shorter-dated bonds given reflation bets.

(Reporting by Yoruk Bahceli, editing by Larry King)