It is based not on subtraction but on division 6-month YTM on 10-year YTM: Chart #3 | 6m/10y US Treasuries ratio and Dollar Index We see some kind of dependence between them, but as we previously said – it’s not as obvious as AUD/USD with Gold, for instance. Still if you’re interested in this topic – there is a lot of space for your own study. Here you clearly see the cycles by Ratio. Reducing of the black line shows periods of rate decreasing and recession, while increasing shows growth in the economy and rate hiking. So, tell me how you will use bonds on Forex market? Pipruit: Ok, I’ll try: 1. When the Central Bank’s rates right on top and the economy overheated – fast bond yield decreasing will be the first bell of possible chilling out of the economy and leads to fast appreciation of Dollar value. This is a run-to-quality due risk aversion. Also the same could happen with Switzerland's currency and bonds; 2. Inter-market spread is an excellent indicator of carry value. Reducing of spread tells us that carry attractiveness significantly decreases and this leads to depreciation of the carry currency, for example, of the AUD/USD; 3. After the initial splash in bond yields during risk aversion – spread will gradually increase. When rates are at low during recession stage bond spread stands at maximum value; 4. Starting of short-term interest rate increases during recession period that is supported by good macro economic data could be the signal of starting point of economy growth. Some time after that rate hiking will come and increasing of US Dollar; 5. We must take into consideration risk aversion moments – rising yields, especially in short-term bonds after recession is dollar bullish with some lag, while falling yields – is bearish.