MONEY MARKETS-China yields rise on policy tightening view

* China rates higher as tone on growth view changes

* Beijing seen tightening but route uncertain

* South Korea rattled by surprise growth data

By Umesh Desai

HONG KONG, Oct 26 (Reuters) - Chinese interest rates rose on Monday on growing speculation of a policy tightening following a change in the tone of official rhetoric about the economic recovery.

In South Korea, comments by the finance minister against a premature exit strategy failed to prevent the market from taking a bearish rate view after data showed the the economy grew at its fastest quarterly pace in 7-½ years.

Asia's fourth-largest economy expanded a seasonally adjusted 2.9 percent in July to September, stronger than a 2.2 percent rise forecast in a Reuters poll and the fastest clip since the first quarter of 2002. [ID:nSEO255937]

That sparked expectations of an early rate hike, concerns which were not alleviated despite Finance Minister Yoon Jeung-hyun remarks that despite the growth "surprise" it is still premature to implement an exit from the stimulus support.

"A much better than expected Korea Q3 GDP has obviously increased the markets odds for early rate hike by the BOK," said a note from Royal Bank of Scotland after the data release.

December treasury bond futures KTBc1 fell as much as 30 ticks to 107.85, before recovering to 108, still lower by 15 ticks from the previous close.

The benchmark five-year treasury bond yield KR5YT=KSDA rose 4 basis points to 5.11 percent, while the one-year interest rate swaps KRQMCD1Y=KMBC jumped 4 bps to 3.67 percent, the highest since Dec. 2008.

The Bank of Korea reviews the 7-day repurchase agreement rate KROCRT=ECI on Nov. 12. The latest Reuters poll showed earlier in the month seven out of 16 economists expected a rate hike before end of the year. [ID:nSEO11199]

"Its been told so many times, people are not responding to rhetoric both from Bok and Ministry of Finance," said a Seoul-based trader adding the quarterly growth numbers had surprised on the upside.

CHINE RHETORIC

China's Vice-Premier Li Keqiang said on Monday recovery at the world's third largest economy has been consolidated after performing better than expected.

Li's comments echo those from the State Council last week which said the economy had performed better than expected in the first nine months of the year and that recovery had been "consolidated".