Basis Point

A unit of measure equal to one-hundredth of a percentage point (0.01%), used to express changes in interest rates, yields, or spreads in finance.

What is Basis Point?

Abbreviated as “bps” or “bips,” 100 basis points equal 1%, so a 50 bps rate hike increases from 4.50% to 5.00%. In bond markets, a 1 bp change in yield on a $1 million par bond alters its price by about $100 (basis point value or BPV). The Fed’s September 2025 cut was 50 bps, the largest since 2008.

Basis points avoid ambiguity in percentage discussions; a 10% increase from 5% is 50 bps, not 0.5%. In mortgages, origination fees are often 100-200 bps of the loan amount, equating to $2,000-$4,000 on a $200,000 loan. Spreads like corporate bond yields over Treasuries are quoted in bps (e.g., BBB spreads at 150 bps in 2025).

Globally, central banks use bps; the ECB cut by 25 bps in June 2025, aligning with Fed moves.