* German yield rises as stocks recover, more talk of govt spending
* Italian yields briefly hit new high, then fall back
* ECB disappointed markets with Thursday's stimulus package
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Adds second quote, updates prices)
LONDON, March 13 (Reuters) - Euro zone government bond yields rose again on Friday after Thursday's selloff, when the European Central Bank disappointed markets with its measures to contain the effects of the coronavirus.
Italian yields briefly rose to their highest since July, before falling back as policymakers sought to calm investors' fears.
German bond yields also rose. Analysts said that investors were being forced to sell even safe-haven bonds to maintain liquidity.
A comment by ECB President Christine Lagarde on Thursday that the central bank was not there to "close spreads" hit peripheral government bond markets hard, especially Italy's.
The ECB was expected to lower interest rates and provide more targeted support that would reduce government borrowing costs, but the bank's focus was deemed to be in helping banks.
"The market is still volatile. A lot of investors still need liquidity and they have to sell even safe havens," said Sebastian Fellechner, an analyst at DZ Bank.
"The ECB delivered huge support for the banking sector. For govvies (government bonds), it was a real disappointment," he said.
ECB policymakers shifted to damage control on Friday, with chief economist Philip Lane saying they would "not tolerate any risks to the smooth transmission of our monetary policy in all jurisdictions of the euro area."
"Lane's comments today are picking up the pieces of the damage done yesterday," said Christoph Rieger, head of rates and credit research at Commerzbank. "Lagarde has no experience with markets and that became obvious yesterday."
The benchmark German 10-year yield rose 9 basis points to -0.651%, helped by stock gains following the worst day on record for European shares.
Fellechner said more talk among German politicians about fiscal stimulus in the euro zone's largest economy was also pushing German yields higher.
A key market gauge of long-term euro zone inflation expectations rose as high as around 0.96% from record lows below 0.90% on Thursday.
ITALIAN YIELDS NEAR 2%
Italian 10-year yields rose more than 20 basis points to 1.968% before falling back. They were last down 3 bps at 1.70%, after Italian central bank chief Ignazio Visco said the ECB can focus its bond purchases on particular countries if necessary.
Italy's 10-year bond yield rose as high as 1.88% on Thursdayh, its biggest one-day increase since the euro zone debt crisis in 2011.
The country has been hit hard by the coronavirus, with the country in lockdown as the government tries to stop the virus from spreading. Economists predict Italy's economy will suffer a sharp slowdown and recession.
The gap between Italian and German 10-year bond yields , effectively the risk premium the latter pays on its debt, had pushed out to its widest since June at around 261 bps on Thursday. It stood at 250 bps on Friday.
With the ECB restricted as to what more it can do to support the economy, the pressure is on euro zone governments to announce more fiscal easing.
Analysts said such easing, which was inevitable given announcements about more stimulus in Italy and Britain, would keep upward pressure on government bond yields.
(Reporting by Tommy Reggiori Wilkes, additional reporting by Dhara Ranasinghe; editing by Larry King)