BPS

BPS

See: Basis point.

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Basis Point

A unit of percentage measure equal to 0.01%. Basis points are commonly used when discussing changes to interest rates, equity indices, and fixed-income securities. In the media, perhaps its most common use is in reporting a central bank's changes to prevailing interest rates. For example, to indicate that prevailing rates have dropped from 1.5% to 0.5%, a newspaper might report that the Federal Reserve cut interest rates 100 basis points.

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Basis Point (BPS)

What Does Basis Point (BPS) Mean?

A unit equal to 1/100 of 1%; it is used to denote a change in a financial instrument (usually a fixed-income security). The basis point is used commonly for calculating changes in interest rates, equity indexes, and the yield of a fixed-income security.

Investopedia explains Basis Point (BPS)

Converting percentage changes in basis points is done as follows: 1% change = 100 basis points, and 0.01% = 1 basis point. Thus, a bond whose yield increases from 5% to 5.5% is said to increase by 50 basis points; when interest rates rise 1%, they have increased by 100 basis points.

Related Terms:
• Bond
• Corporate Bond
• Interest Rate
• Pip
• Yield