Basis Point (BPS)

RECENT NEWS
The Economic Times  Apr 6  Comment 
If you are still nursing your grievance against the RBI for not making it 50 bps when it had all reasons to do so, know that there was a method in the madness.
The Hindu Business Line  Apr 5  Comment 
RBI Governor opens the liquidity floodgates; ball in banks’ court now
The Economic Times  Apr 3  Comment 
The Reserve Bank of India is expected to cut interest rates by at least 25 basis points tomorrow, according to an ET poll.
The Economic Times  Mar 28  Comment 
The market has already factored in a 25 bps rate cut, but even if RBI slashes rates by 50 bps, it will be a big positive but may not trigger a rally in stocks.
MarketWatch  Mar 16  Comment 
Treasury yields tumbled after the Federal Reserve left interest rates unchanged and signaled that it is projecting two rate hikes this year, instead of four. Treasury yields fall when prices rise and vice versa. The yield on the two-year Treasury...
The Hindu Business Line  Mar 2  Comment 
‘RBI easing norms for determining core capital is a progressive step’
The Economic Times  Dec 21  Comment 
Usually, in times like this, there are levers that can play in favour of Indian IT like off-shoring can increase.
The Hindu Business Line  Dec 20  Comment 
IT firm MphasiS has said its margins will take a hit of up to 120 basis points in the December quarter owing to recent floods in Chennai.MphasiS has about 3,000 employees in Chennai....




 

For the article on the company with ticker BPS, see BlackRock Pennsylvania Strategic Municipal Trust (BPS).

A basis point (abbreviated as 'bps' and sometimes pronounced "bips") is a unit that is equal to 1/100th of 1%, and is often used instead of percentages when discussing interest rates, rates of return, and other percentage-based performance metrics that can occur as fractions of a percent. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.

It is common practice in the financial industry to use basis points to denote a rate change in a financial instrument, or the difference (spread) between two interest rates, including the yields of fixed-income securities.

1% change = 100 basis points, and 0.01% = 1 basis point.

So, a bond whose yield increases from 5% to 5.5% is said to increase by 50 basis points; or interest rates that have risen 1% are said to have increased by 100 basis points. The marginal effect of each basis point change in the value of long term bonds can be very significant for this reason changes are tracked by basis points or 1/100th of 1%

Since certain loans and bonds may commonly be quoted in relation to some index or underlying security, they will often be quoted as a spread over (or under) the index. For example, a loan that bears interest of 0.50% per annum above the London Interbank Offered Rate (LIBOR) is said to be 50 basis points over LIBOR, which is commonly expressed as "L+50bps" or simply "L+50"

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