Definition
A basis point (bp or bps) equals one-hundredth of a percentage point (0.01%). It's used to describe small changes in interest rates, yields, or spreads. Using basis points avoids confusion between percentage changes and percentage point changes. 100 basis points equal 1%.
Formula
1 basis point = 0.01% = 0.0001
Example
If bond yields rise from 4.25% to 4.50%, that's a 25 basis point increase.
FAQ
What is Basis Point?
A unit equal to 0.01%, commonly used to measure interest rate changes.
How do you calculate Basis Point?
A common formula for Basis Point is: 1 basis point = 0.01% = 0.0001
Why is Basis Point important?
Basis Point helps investors evaluate fixed income and make more informed decisions.