Basis point (bps)

RECENT NEWS
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.
The Hindu Business Line  May 10  Comment 
Indian Overseas Bank has cut its marginal cost of fund-based lending rate (MCLR) by 10 basis points from May 10 across all tenors. The new MCLR will be 8.55 per cent for one year. For overnight te...
The Hindu Business Line  May 8  Comment 
Bank of India has cut its marginal cost of funds-based lending rates by 5-10 basis points for May, data on the lender’s website showed. The public sector lender has reduced the rate for three-mont...
Motley Fool  May 8  Comment 
Not much change in mortgage rates, which is good news after last week's upticks.
Clusterstock  May 3  Comment 
Treasurys are under pressure after the Federal Reserve held its key rate in a range between 0.75% and 1.00%. Selling is having the biggest impact on the front and belly of the curve, with yields there up as much as five basis points....
Motley Fool  Apr 24  Comment 
Only the slightest of bumps in mortgage rates to kick off the new week.




 

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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