Correlation Between DXY, Bond Yields, and Bond Prices
1. Bond Prices and Bond Yields: Inverse Relationship
Bond prices and bond yields move inversely: when bond prices rise, yields fall; when bond prices fall, yields rise.
This happens because bonds pay fixed coupons; if market interest rates rise, existing bonds with lower coupons become less attractive, pushing their prices down and yields up.
2. DXY and 10-Year Treasury Yield: Generally Positive Correlation
The US Dollar Index (DXY) and the US 10-year Treasury yield typically move in the same direction. When the 10-year yield rises, the dollar tends to strengthen, and vice versa.
This is because higher yields attract foreign capital seeking better returns, increasing demand for the dollar.
Historically, this correlation has been strong, with a rolling correlation averaging around 44.5% and recently rising to about 75% in early 2025.
However, this relationship can break down temporarily due to shifts in market sentiment or safe-haven flows. For example, in mid-2025, the correlation briefly turned negative amid changing investor preferences.
3. DXY and Bond Prices: Indirect Inverse Correlation
Since bond prices and yields are inversely related, and yields and DXY are positively correlated, DXY tends to move inversely to bond prices.
Rising bond prices (falling yields) often coincide with dollar weakness, while falling bond prices (rising yields) support dollar strength.
4. Interest Rates and Their Role
Central bank interest rates influence bond yields and the dollar.
Rate hikes generally push bond yields higher and strengthen the dollar, while rate cuts do the opposite.
Interest rate expectations are a key driver behind the bond yield-DXY relationship.
Summary Table
Relationship Direction/Correlation Explanation
Bond Price ↔ Bond Yield Inverse Fixed coupon bonds lose value when rates rise
10-Year Yield ↔ DXY Positive (usually) Higher yields attract capital, boosting USD
Bond Price ↔ DXY Inverse (indirect) Bond prices up → yields down → USD weakens
Interest Rates ↔ Yield & DXY Positive Rate hikes raise yields and strengthen USD
Conclusion
The US Dollar Index (DXY) generally rises with increasing 10-year Treasury yields because higher yields attract investment flows into US assets, boosting demand for the dollar. Conversely, bond prices move inversely to yields, so rising bond prices tend to coincide with dollar weakness. While this relationship is strong historically, it can fluctuate due to market sentiment, safe-haven demand, and geopolitical factors.
#DOLLAR #DXY
1. Bond Prices and Bond Yields: Inverse Relationship
Bond prices and bond yields move inversely: when bond prices rise, yields fall; when bond prices fall, yields rise.
This happens because bonds pay fixed coupons; if market interest rates rise, existing bonds with lower coupons become less attractive, pushing their prices down and yields up.
2. DXY and 10-Year Treasury Yield: Generally Positive Correlation
The US Dollar Index (DXY) and the US 10-year Treasury yield typically move in the same direction. When the 10-year yield rises, the dollar tends to strengthen, and vice versa.
This is because higher yields attract foreign capital seeking better returns, increasing demand for the dollar.
Historically, this correlation has been strong, with a rolling correlation averaging around 44.5% and recently rising to about 75% in early 2025.
However, this relationship can break down temporarily due to shifts in market sentiment or safe-haven flows. For example, in mid-2025, the correlation briefly turned negative amid changing investor preferences.
3. DXY and Bond Prices: Indirect Inverse Correlation
Since bond prices and yields are inversely related, and yields and DXY are positively correlated, DXY tends to move inversely to bond prices.
Rising bond prices (falling yields) often coincide with dollar weakness, while falling bond prices (rising yields) support dollar strength.
4. Interest Rates and Their Role
Central bank interest rates influence bond yields and the dollar.
Rate hikes generally push bond yields higher and strengthen the dollar, while rate cuts do the opposite.
Interest rate expectations are a key driver behind the bond yield-DXY relationship.
Summary Table
Relationship Direction/Correlation Explanation
Bond Price ↔ Bond Yield Inverse Fixed coupon bonds lose value when rates rise
10-Year Yield ↔ DXY Positive (usually) Higher yields attract capital, boosting USD
Bond Price ↔ DXY Inverse (indirect) Bond prices up → yields down → USD weakens
Interest Rates ↔ Yield & DXY Positive Rate hikes raise yields and strengthen USD
Conclusion
The US Dollar Index (DXY) generally rises with increasing 10-year Treasury yields because higher yields attract investment flows into US assets, boosting demand for the dollar. Conversely, bond prices move inversely to yields, so rising bond prices tend to coincide with dollar weakness. While this relationship is strong historically, it can fluctuate due to market sentiment, safe-haven demand, and geopolitical factors.
#DOLLAR #DXY
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.