Basis Point - BPS

Basis Point - BPS

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

Notes:

The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.

So, a bond whose yield increases from 5.0% to 5.5% is said to increase by 50 basis points or interest rates that have increased by 1% are said to have increased by 100 basis points.

See also: Basis Rate Swap, Bond, Federal Open Market Committee - FOMC, Interest Rate, Yield