* Aussie swaps curve steepens as longer end rises
* S&P comments on Greece stokes paying interest
* Rate hike hopes fade in South Korea after weak data
By Umesh Desai
HONG KONG, March 3 (Reuters) - Australian swaps at the front end of the curve were lower on Wednesday, a day after their sharp rise but longer dated swaps rose after Standard & Poor's said investor fears on Greece's debt crisis were overdone.
"The market is short at the front end of the curve so it is difficult for it to sell off in any meaningful fashion," said JPMorgan interest rate strategist Sally Auld.
One-year interest rate swaps fell by 2 basis points to 4.65 percent while the 2-year contract dropped 2.5 bps to 5 percent.
On Tuesday, swaps rose after the Reserve Bank of Australia's said the country should return to 3-plus percent growth this year, and that interest rates should rise to an "average" level to avoid fuelling price pressures.
But swaps at the longer end rose with the 5-year and the 7-year IRS rising by 5-7 bps after David Beers, S&P's global head of sovereign ratings, said it is less pessimistic on Greece's debt crisis than financial markets in general.
"Those headlines give risky assets a little bit of bid and therefore we saw yields move a little higher at close," said JPMorgan's Auld.
David Beers, also told Reuters that the debt problems of Greece and some other euro zone countries pale in comparison with long-term challenges of population ageing.
In South Korea, bond futures extended gains and swaps fell after data released showed factory output in January missed market expectations, adding to worries that Asia's fourth-largest economy is losing steam.
Two year swaps fell 2 bps to 3.77 percent and the 5-year contract eased 3 bps to 4.2 percent. The March contract on 3-year treasury bond futures rose 12 ticks to 110.76.
"Given the leading indicator trend, it's likely that the economy's momentum will peak in the first quarter and gradually slow throughout the year," said Lee Sung-kwon, chief economist at Shinhan Investment Corp pointing to the weakening case for an interest rate increase.
The Bank of Korea next reviews its policy on March 11, the last monthly meeting for Governor Lee Seong-tae before he leaves office.
In February, the central bank kept the 7-day repurchase agreement rate on hold at a record low of 2.00 percent for a 12th consecutive month.
At that meeting some central bank board members called for timely exit strategies to head off property bubbles and curb inflationary pressures, but the government has repeatedly expressed its opposition to an early interest rate increase. (Editing by Jan Dahinten)