Loading the player...

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. In most cases, it refers to changes in interest rates and bond yields.

For example, if the Federal Reserve Board raises interest rates by 25 basis points, it means that rates have risen by 0.25% percentage points. If rates were at 2.50%, and the Fed raised them by 0.25%, or 25 basis points, the new interest rate would be 2.75%.

In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. For example, if a bond yield moves from 7.45% to 7.65%, it is said to have risen 20 basis points.

The usage of the basis point measure is primarily used in respect to yields and interest rates, but it may also be used to refer to the percentage change in the value of an asset such as a stock. It may be heard that a stock index moved up 134 basis points in the day's trading. This represents a 1.34% increase in the value of the index.


The easiest way to convert basis points into a percent form is by simply taking the amount of basis points and multiply by 0.0001 which will give the percent in decimal form. So if you have to convert 384 basis points into a percent, simply multiply 384 by 0.0001. This will give you 0.0384 which is 3.84% (0.0384 x 100).

This can also be done in reverse to find out the number of basis points that a percent represents by dividing the percent (in decimal form) by 0.0001. For example, say the rate on a bond has risen 2.42%, simply take 0.0242 (2.42% / 100) and divide by 0.0001 to get 242 basis points.

(For more on interest rate changes, see our Bond Basics Tutorial.)

  1. Why are bond yields calculated in terms of basis points?

    Find out why financial analysts and publications track and quote bond yields in basis points, or bps, rather than simply ... Read Answer >>
  2. What does it mean when someone says that a stock went up X points? Does this refer ...

    For stocks, one point equals one dollar. So when you hear that a stock has lost or gained X number of "points", this is the ... Read Answer >>
  3. What causes a bond's price to rise?

    Learn about factors that influence the price of a bond, such as interest rate changes, credit rating, yield and overall market ... Read Answer >>
  4. Should investors focus more on the current yield or face value of a bond?

    Find out when investors should focus on a bond's current yield versus its face value, including an example of how current ... Read Answer >>
Related Articles
  1. Trading

    A Common Base for Understanding Changes in Value

    A discussion of basis points as well as basis point calculations using Excel.
  2. Investing

    How Points Relate to Financial Instruments

    Points usually refer to the measurement of some change in a financial instrument’s value.
  3. Investing

    Understanding Interest Rates, Inflation And Bonds

    Get to know the relationships that determine a bond's price and its payout.
  4. Managing Wealth

    What You Should Know About Convertible Bonds

    As investors continue to seek yield in the current market, it's now a good time to bring up an often overlooked asset class—the convertible bond.
  5. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  6. Investing

    How Rising Interest Rates Impact Bond Portfolios

    A look at the impact that changing interest rates - rising or falling - have on bonds and what investors need to consider.
  7. Trading

    Get Positive Results With Negative Basis Trades

    Capitalize on the difference in spreads between markets with this popular strategy.
  8. Investing

    How Interest Rates Affect Mutual Funds

    Find out how changing interest rates impact mutual funds, including bond and money market funds, and how higher rates can discourage investors.
  9. Investing

    5 Basic Things To Know About Bonds

    Learn these basic terms to breakdown this seemingly complex investment area.
  1. Points

    1. A 1% change in the face value of a bond or a debenture. 2. ...
  2. Decimalization

    A system where security prices are quoted using a decimal format ...
  3. Bond

    A debt investment in which an investor loans money to an entity ...
  4. High-Yield Bond Spread

    The percentage difference in current yields of various classes ...
  5. Bond Quote

    The price at which a bond is trading. A bond quote is typically ...
  6. Yield Basis

    A method of quoting the price of a fixed-income security as a ...
Hot Definitions
  1. Perkins Loan

    A loan program that provides low-interest student loans to undergraduate and graduate students who demonstrate exceptional ...
  2. Wealth Management

    A high-level professional service that combines financial/investment advice, accounting/tax services, retirement planning ...
  3. Assets Under Management - AUM

    The market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) is looked ...
  4. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit scores or limited credit histories. There is no official ...
  5. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  6. Federal Debt

    The total amount of money that the United States federal government owes to creditors. The government's creditors include ...
Trading Center