* Canadian dollar at $1.1306, or 88.45 U.S. cents * Loonie's lowest level since July 2009 * 10-yr government bond yield lowest since May 2013 (Recasts with five-year low; adds details, quotes, and updates prices) By Leah Schnurr TORONTO, Oct 14 (Reuters) - The Canadian dollar dropped to its lowest level against the greenback in more than five years on Tuesday, breaking through the C$1.13 level as oil prices tumbled. The currency's nearly 1 percent fall also set a new 2014 low, taking out the previous trough of C$1.1279, which was recorded in March. That level had been closely watched by investors after the loonie almost dropped through it earlier this month. The Canadian dollar has been rolling on a downward slope since July, pushed lower as U.S. dollar rallied on a growing belief that the U.S. Federal Reserve will start to tighten monetary policy before the Bank of Canada does. Weaker prices for oil, a major Canadian export, have also undercut the loonie and a more than 4 percent drop in U.S. crude propelled it through key resistance barriers on Tuesday. Also on Tuesday, Bay Street stocks officially fell into a correction as worries over the prospects for global economic growth again gripped the market. "There's definitely a deteriorating sentiment overall in markets," said Don Mikolich, executive director of foreign exchange sales at CIBC World Markets in Toronto. "In general, the market has been thinking that we would see this sort of direction and it's hard to see an immediate top at this stage" for the U.S. dollar-Canadian dollar, Mikolich said, noting the lack of domestic economic data on tap until Friday's inflation figures. The Canadian dollar ended the North American session at C$1.1306 to the greenback, or 88.45 U.S. cents, weaker than Friday's official close from the Bank of Canada of C$1.1217, or 89.15 U.S. cents. Most market participants in Canada were away on Monday for the Thanksgiving holiday. The loonie hit a session low of C$1.1313, its lowest level since July 2009. The next technical resistance level lies in the mid-C$1.13s, and while a rebound in oil prices could help the loonie in the near term, momentum is likely to the downside, Mikolich said. The Canadian dollar entered 2014 as many investors' favorite short position but it managed to recover through the spring and climbed to the low C$1.06 area by early July. But that did not last, with expectations that the Fed will start to raise rates next year fueling the U.S. dollar to the detriment of the loonie, a trend many analysts expect will continue. The yield on the two-year Canadian government bond fell below 1 percent to hit its lowest level since February. The two-year was up 13 cents to yield 0.985 percent. The benchmark 10-year was at its lowest level since May 2013, yielding 1.950 percent, up 53 cents in price. (Editing by Peter Galloway)