CANADA FX DEBT-C$ strengthens to nearly 3-week high as greenback slides

* Canadian dollar at C$1.3599, or 73.53 U.S. cents

* Bond prices little changed across the yield curve

TORONTO, May 16 (Reuters) - The Canadian dollar strengthened on Tuesday to a nearly 3-week high against its U.S. counterpart as oil prices rose and the greenback lost ground against a basket of major currencies.

The U.S. dollar was pressured by allegations that

U.S. President Donald Trump disclosed highly classified information to Russia's foreign minister about a planned Islamic State operation.

U.S. crude prices were up 0.84 percent to $49.26 a

barrel after top producers Saudi Arabia, Russia and Kuwait supported prolonging supply cuts until the end of March 2018 in an effort to drain a global glut. The Canadian dollar's historically close link to oil, one of Canada's major exports, has become stronger in recent weeks. The three-month rolling correlation between the loonie and oil was at nearly its highest since September at 0.74, indicating that the currency and the commodity move mostly in the same direction.

At 9:12 a.m. ET (1312 GMT), the Canadian dollar was

trading at C$1.3599 to the greenback, or 73.53 U.S. cents, up 0.2 percent, according to Reuters data. The currency's weakest level of the session was C$1.3659, while it touched its strongest since April 27 at $1.3596. The loonie has recovered from a recent 14-month low at C$1.3793. It had been pressured not long ago by depressed oil prices, a more uncertain trade outlook with the United States and investor worries about how the troubles of alternative

lender Home Capital Group could affect the country's

real estate market. Home Capital may need to draw down more from a high-interest credit facility provided by the Healthcare of Ontario Pension Plan in order to meet a debt repayment due next week, director Alan Hibben told Reuters on Monday. Canadian government bond prices were little changed across

the yield curve, with the 10-year rising 1 Canadian

cent to yield 1.593 percent. The 10-year yield fell 1 basis points further below its U.S. equivalent to a spread of -75.4 basis points. Lending to small Canadian businesses was little changed in March compared to the month before, though borrowing by medium-sized companies jumped as they benefited from a recovery in the energy sector, data showed.

(Reporting by Fergal Smith; Editing by Nick Zieminski)