It is the traditional handkerchief to baby bonnet, or baby bonnet to handkerchief,
depending on how/when you start your tradition.
Here is one of the many poems you can find about hanky baby bonnet:
A tiny square of linen
And a dainty edge of lace,
Designed into a bonnet,
To frame your baby’s face.
After baby’s worn it
Fold and tuck away...
And it becomes a hanky
For your daughter’s Wedding Day.
Or if the baby is a boy,
On the day he marries
This can be the “something old”
His joyful bride will carry.
Cheesy but in a sweet way!
Anyway, I started with a square of fine linen,
from the heirloom store (Martha's heirlooms)
entredeux, French lace and ribbons.
To make the bonnet, I folded both edges toward the center,
and stitched close to the back edge to make a casing.
(the front is not stitched)
I used a narrow ribbon and tied it to make the back of the bonnet.
For the front, I used hand sewed the wider ribbon about 1 inch from the edge.
I had no baby to model this cute little bonnet,
so Miss C. is modeling it on her baby doll!