Basis Point (BPS)

A basis point (BPS) is a unit of measurement equal to 1/100th of a percentage point. It is used to express the difference between two interest rates or prices. For example, if the interest rate on a bond is 5% and it rises to 5.1%, the increase is 10 basis points.

Basis points are also used to compare the performance of different investments. For example, if an investment returns 10% and another returns 11%, the difference is 100 basis points.

Basis points are often used in the financial markets to express the volatility of an asset. For example, if the price of a stock changes by 1%, it is said to have moved by 100 basis points.

Basis points are also used to express the yield on a bond. The yield on a bond is the annual interest payment expressed as a percentage of the bond's face value. For example, if a bond has a face value of $1,000 and pays an annual interest payment of $100, the yield is 10%.

Basis points are a useful way to express small changes in interest rates, prices, and yields. They are also used to compare the performance of different investments and to express the volatility of an asset.