🔍 A Basis Point (BPS) is 0.01% or 1/100th of a percent, used to measure small changes in interest rates, bond yields & financial percentages clearly and precisely.
🔗 Learn more:
Basis Point What is Basis Point and how is it used to measure the change in values? The term 'Basis Point' refers to a measurement unit that
The term 'Basis Point' refers to a measurement unit that is used to highlight the change in the interest rates. It is also known as BP, BPS or BIPS in short, and 1 Basis Point in percentage terms is equal to a value of 0.01% (or 0.0001).
The BPS percentage does not mean that the value has increased/decreased by this percentage. Instead, it indicates that the base of the value has shifted. For example, if the current interest rate is 5%, and this is decreased by 10 Basis Points, then it means that the new interest rate is 4.90% (instead of a decrease of: 10% of 5% = 0.05%).
The concept of Basis Point is primarily used in Money Market and Fixed Income market, to calculate the change in interest rates for lending/borrowing, or to indicate a change in the investment returns for different instruments. But the same generic concept can also be applied in other fields.
