* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Adds German inflation, ECB minutes, quote)

By Yoruk Bahceli

July 29 (Reuters) - Euro zone bond yields rose off five-month lows on Thursday as investor sentiment reached new peaks, German inflation hit a 13-year-high and the European Central Bank reiterated its new strategy may mean temporary inflation overshoots.

U.S. Treasury yields also ticked up after the Federal Reserve flagged ongoing discussions around the eventual withdrawal of monetary policy support and data showed the U.S. economy grew solidly though below expectations.

At 1434 GMT, Germany's 10-year yield, the benchmark for the bloc, was set for its first daily rise this week, up about 1 basis points to -0.44% after touching its lowest since February at -0.465% in early trade.

A flurry of buoyant corporate earnings and macro data helps maintain a modest risk-on mood across European financial markets.

Euro zone economic sentiment hit a record high in July, estimates from the European Commission showed, though a drop in optimism among consumers and the slower rate of increase may signal the peak is fast approaching.

In Germany, consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose slightly more than expected - by 3.1% in July compared with 2.1% in June, the Federal Statistics Office said.

July's reading was the highest since August 2008, when the harmonised inflation rate hit 3.3%, an official at the Statistics Office said.

In Frankfurt, the accounts of the last meeting of ECB policymakers showed, as expected, that the central bank's new strategy may lead it to temporarily overshoot its 2% inflation target.

"The ECB accounts didn’t reveal any new information," said Althea Spinozzi, fixed income strategist at Saxo Bank.

"Therefore the market is sticking to what it learnt at the beginning of the month: the ECB will remain dovish despite inflation overshooting the ECB’s target," he said, pointing to the "muted" market reaction to German inflation.

Spinozzi nevertheless warned that the situation could quickly change.

"The honeymoon will be short-lived because it’s clear that the Fed is very close to tapering purchases under its QE programs, which will inevitably push yields in the U.S. higher, and in Europe as a consequence," he said, adding that German elections in September would contribute to a rise in yields.

At the conclusion of its meeting on Wednesday, the Fed flagged ongoing discussions around the eventual withdrawal of monetary policy support but gave no details on when it is likely to reduce bond purchases.

(Reporting by Yoruk Bahceli; additional reporting by Julien Ponthus Editing by Catherine Evans and Mark Heinrich)