* Dollar rates ease toward record low
* Chinese IRS, 1-yr bond yield rise on liquidity outlook
* S.Korean bond futures fall, swaps rates rise on policy view
HONG KONG, July 27 (Reuters) - Interest rate swaps and 1-year treasury bond yields in China rose on Monday, reflecting longer term concerns about liquidity even though short-term rates fell as oversubscribed funds from a large IPO returned to the market.
In South Korea, bond futures headed lower and swap rates rose amid speculation authorities could be considering a shift in monetary policy to a less accomodative one.
The cost of borrowing dollars in the region eased marginally tracking the decline in Libor rates last week, matching its recent record low.
Three-month Singapore interbank dollars were quoted at 0.50429 percent, marginally down from Friday's 0.5057 percent. Rates are just off last Thursday's record low.
In China, one-year government bond yield rose to 1.6809 percent from Friday's 1.6736 percent. Yields were just below 1 percent at the start of the month.
Interest rate swaps rose across most maturities as markets braced for tighter liquidity amid signs that runaway domestic lending and surging capital inflows are stoking stock and property prices.
The 3-year IRS rose 4 basis points to 2.75 percent. It has risen from 2.16 percent in end-June after having struck a near 10-month high of 2.94 percent earlier this month.
Merrill Lynch expects further rises ahead and has recommended paying interest for that maturity.
"We see potential for further rise in rates despite the recent surge," it said in a recent report underlining macro-economic triggers like a broadening economic recovery and inflationary pressures.
"Though the PBoC is not making any explicit noises about any form of policy tightening, their actions will continue to be interpreted negatively in this environment," it said.
Meanwhile, shorter term money market rates fell with the weighted average 7-day repo rate down to 1.6039 percent from Friday's 1.7152 percent and the 90 day PBOC bill at 1.4236 percent, lower than Friday's 1.4255.
Last week, China State Construction Engineering Corporation raised 50.2 billion yuan after Beijing resumed permissions for initial public offerings in June.
That IPO attracted 1.857 trillion yuan in subscriptions and short-term rates are falling as money returns to unsuccessful bidders.
The stock regulator has pushed a slew of companies to launch offerings since it resumed IPOs last month to soak up huge liquidity in the system, which has pushed China's benchmark Shanghai Composite Index up 85 percent so far this year, and is threatening to create an asset bubble.
The China Securities Regulatory Commission has been pushing roughly one major IPO per week in the past several weeks, hoping to divert hundreds of billions of yuan of market liquidity, which is partly propelled by excessive bank lending.
Chinese banks' new lending in the first half reached 7.37 trillion yuan, far above the government's 5 trillion yuan minimum target for the year, and it is estimated one-fifth of that found its way into stocks, property and other asset markets.
In South Korea treasury bond futures edged down early amid continuing debate over the timing of a shift in monetary policy, while awaiting monthly economic indicators due later in the week.
The September contract slid 7 ticks to 109.79 and the 1-year IRS rose a basis point to 2.905 percent.
South Korean regulator Financial Supervisory Service (FSS) said it will toughen mortgage lending by broadening tight loan ceilings to the whole of Seoul and surrounding cities from Tuesday.
But South Korean President Lee Myung-bak said on Monday it was premature to prepare for an exit from the government's accomodative policy, pledging authorities would maintain it to support a nascent recovery.
"I dont expect any exit strategy this year. Korea's liquidity conditions are not that excessive compared with say Taiwan or China," said Sharon Lam, analyst with Morgan Stanley.
"Money market rates should come down, those concerns are overdone. But the downside is limited," she said. (Reporting by Umesh Desai; Editing by Kazunori Takada)