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* C$ at C$1.0535 vs US$, or 94.92 U.S. cents * Weakest level versus US$ since October 5, 2011 * 10-year Canadian bond yields highest since August, 2011 By Solarina Ho TORONTO, June 24 (Reuters) - The Canadian dollar hit its weakest level against its U.S. counterpart in 21 months on Monday, as the Federal Reserve's talk of scaling back stimulus pushed investors away from riskier assets. Shares and commodities fell, while yields on 10-year Treasury notes spiked to two-year highs. "We're driven by the U.S. dollar right now and as U.S. yields continue to march higher you're going to see continued U.S. dollar strength. That's probably going to be across the board," said Benjamin Reitzes, senior economist and foreign exchange strategist at BMO Capital Markets. "It's probably going to be a tough go for Canada for a while yet. This upward cycle in yields probably, at least for the near term, isn't done yet." The Canadian dollar, which was underperforming most other major currencies, was trading at C$1.0535 versus the U.S. dollar, or 94.92 U.S. cents, at 9:14 a.m. (1314 GMT). This was sharply weaker than Friday's finish at C$1.0456, or 95.64 U.S. cents. The currency at one point hit C$1.0554, its weakest level since October 5, 2011. Canadian government debt prices mirrored the U.S., with the two-year bond shedding 8.5 Canadian cents to yield 1.282 percent. The benchmark 10-year bond lost 86 Canadian cents to yield 2.549 percent, its highest yield since early August, 2011. Reitzes said BMO was expecting the Canadian dollar to weaken through to early next year on U.S. dollar strength and U.S. economic outperformance. There is little domestic news expected to drive the currency until Friday, when the government releases economic growth data for the month of April. "We're a tad below consensus, looking for an unchanged number. And last week's soft CPI (consumer price index) number (is) just another reason for nothing new to come out of Bank of Canada and no reason for them to tighten policy, to provide any support for the dollar," said Reitzes. Data on Friday showed a jump in natural gas prices raised Canada's annual rate of inflation to 0.7 percent in May from a 3-1/2-year low of 0.4 percent, but the figure remained well below the central bank's target, confirming there is little pressure to raise interest rates soon.