It was the North in the Civil War. The North's nicknames were the Yanks(Yankees) and the South's were the Rebels.
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The man felt insulted when he was referred to as a yankee.
A Yankee dime is a southern United States slang term for a kiss.
USA
Yankees were what Southerners refered to Northerners
Historians writing about the US Civil War capitalize both Rebel and Yankee. They do so as they are treated as proper nouns.