Basis point (bps)

The Hindu Business Line  Jun 30  Comment 
PPF will now yield 7.8%, KVP 7.5%
The Economic Times  Jun 14  Comment 
The Fed first increased rates in December, 2015, after more than a decade.
The Hindu Business Line  Jun 11  Comment 
The June monetary policy meeting came against the backdrop of a sea change in the perception of future inflation trajectory.There were widespread expectations that the central bank would acknowledge t...
Clusterstock  Jun 6  Comment 
Treasurys are rallying on Tuesday morning, causing longer dated yields to press to their lowest levels since the days following Donald Trump's election win. The complex held early gains and climbed to its best levels of the day after a...
Clusterstock  Jun 2  Comment 
Treasurys are rallying after the disappointing May jobs report. The US economy added 138,000 nonfarm jobs, missing the 182,000 that economists were anticipating. Additionally, the unemployment rate fell to a post-recession low of 4.3%. The...
Motley Fool  May 17  Comment 
The few moves in average home loan interest rates were to the benefit of hopeful borrowers.
Motley Fool  May 12  Comment 
Mortgage rates creep upward today, with a couple of notable exceptions.
Motley Fool  May 11  Comment 
Home loan interest rates dropped marginally across the board Thursday.


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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