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A basis point (often denoted as bp or ‱; rarely, permyriad) is a unit that is equal to 1/100th of a percentage point. It is frequently used to express percentage point changes of less than 1%. It avoids the ambiguity between relative and absolute discussions about rates. For example, a '1% increase' in a 10% interest rate could mean an increase from 10% to 10.1%, or from 10% to 11%.
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. This is partially due to the large effect of small changes to financial instruments. The basis point is also used to calculate changes in equity indexes and the yield of a fixed-income security.
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% above LIBOR is said to be 50 basis points over LIBOR.
Examples
A rate change from 5% to 6%, reflects a change of 1 percentage point or 100 basis points.
A rate change from 6.7% to 6.9% reflects a change of 0.2 of a percentage point or 20 basis points.
A rate change from 2.75% to 3.20% reflects a change of 0.45 of a percentage point or 45 basis points.
Another way (and probably the most concise expression) to approach what a basis point is: It is 1/10,000 (1/100 x 1/100) or one percent of one percent.
Related units
- Percentage point
- Percent (%) 1 part in 100
- Permille (‰) 1 part in 1000
- Parts per million (ppm)
- Parts per billion (ppb)
- Parts per trillion (ppt)
See also
Article is licensed under GNU Free Documentation License.
It uses material from Wikipedia.org Original article is here.
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Indonesian central bank cuts rate by 50 basis point to 8.75% (People's Daily)The Indonesian central bank Wednesday slashed its benchmark interest rate by 50 basis points to 8.75 percent following the good outlook of inflation to spur growth, according to a statement by the bank. The 50 basis point cut is in line with the recent demand from the government and business sectors to boost retail sector, as the country has decided to rely much on the huge domestic market ...
Mortgage-backed securities jump, signaling rates to drop (Market Watch)SAN FRANCISCO (MarketWatch) -- Mortgage-backed securities rallied Tuesday, sending yields sharply lower, which indicates mortgage rates are likely to fall further. Yields on securities of pooled mortgages backed by Fannie Mae fell 30 basis points Tuesday from Monday's close, following a 17 basis-point decline Monday, said Miller Tabak & Co. bond strategist Tony Crescenzi. These yields correlate ...
Home finance firms need Rs 40,000 crore (Business Standard India)Since RBI has reduced the CRR by 50 basis point which will inject extra Rs 20,000 in the financial system will also ease the monetary pressure of HFCs, but government should take some steps to improve the ECBs as this will help in incresing the liquidity position of the entire market and in the process our forex reserves also go up.
BOND REPORT: Treasurys Slide As Auctions Loom (Nasdaq)Treasurys declined slightly Monday, pushing yields up, amid concern of more debt issuance starting this week. Ten-year note yields (UST10Y) rose 2 basis points to 2.43%. A basis point is one one-hundredth of a percent.
Dollar drops in European trade (AFP via Yahoo! News) The dollar fell Wednesday on profit-taking after gaining in Asian deals on optimism about US president-elect Barack Obama's economic stimulus plans, dealers said.
Anheuser-Busch InBev Sells $5 Billion in its Largest Bond Sale (Bloomberg)Jan. 7 (Bloomberg) -- Anheuser-Busch InBev NV , the world’s largest brewer, sold $5 billion of dollar-denominated bonds in its biggest debt sale, according to data compiled by Bloomberg.
(AFX UK Focus) 2009-01-05 13:28 Hungary cbank ends meeting, rates not discussed (Interactive Investor)BUDAPEST, Jan 5 (Reuters) - The National Bank of Hungary did not discuss interest rates at a meeting of the Monetary Council on Monday, in line with its schedule, the bank said in a statement. Some investors had speculated the bank would cut rates on Monday after it delivered a surprise 50 basis point rate cut at its previous non rate-setting meeting in December. It cut by another 50 basis ...
Schneider Electric Sells 750 Million Euros of Bonds Due 2013 (Bloomberg)Jan. 7 (Bloomberg) -- Schneider Electric SA , the world’s biggest maker of circuit breakers, sold 750 million euros ($1 billion) of bonds due in 2013, according to a banker involved in the transaction.
Brazil Bounces (Forbes)Despite grim industrial production data, a rally in metals prices and hope for monetary easing boost stocks.
Canada’s Dollar Declines From 2-Month High Amid Growth Concern (Bloomberg)Jan. 7 (Bloomberg) -- Canada’s currency fell from a two- month high as an increase in crude oil inventories reduced oil prices and larger-than-expected U.S. job cuts in December suggested weakening demand for Canadian exports.
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Basis Point: Il punto base, utilizzato soprattutto per misurare le variazioni nei tassi di interesse, è pari allo zero virgola zero uno per cento (0.01%), corrisponde cioè a un centesimo di ...
Basis point - Wikipedia, the free encyclopediaA basis point (often denoted as bp or ‱; rarely, permyriad) is a unit that is equal to 1/100th of a percentage point. It is frequently used to express percentage point changes ...
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Basis Point GroupExperts in Front, Middle and Back Office Operations and Technology Management serving the financial industry. Measuring operations performance and risk.
BASIS POINT (Punto base): il basis point è un'unità che misura uno ... IL GLOSSARIO PER L'INVESTITORE IN TITOLI STRUTTURATI E SUBORDINATI Il presente Glossario è conforme a quello di cui alle Linee Guida ABI in materia di informazioni da fornire al ...
Basis Point (BPS)Basis Point (BPS) - Definition of Basis Point (BPS) on Investopedia - A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument.
basis point - Hutchinson encyclopedia article about basis pointAll content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only.
Banca Monte dei Paschi di Siena | Glossario Basis point Corrisponde ad un centesimo di punto percentuale.
basis point Definitionbasis point - definition of basis point - One hundredth of a percentage point (0.01%). Basis points are often used to measure changes in or differences between yields on fixed ...
