Basis point

Yields on bonds, notes, and other fixed-income investments fluctuate regularly, typically changing only a few hundredths of a percentage point.

These small variations are measured in basis points, or gradations of 0.01%, or one-hundredth of a percent, with 100 basis points equaling 1%. For example, when the yield on a bond changes from 6.72% to 6.65%, it has dropped 7 basis points.

Similarly, small changes in the interest rates charged for mortgages or other loans are reported in basis points, as are the fees you pay on various investment products, such as annuities and mutual funds. For example, if the average management fee is 1.4%, you might hear it expressed as 140 basis points.

Your percentage of ownership in certain kinds of investments may also be stated in basis points, and in this case each basis point equals 0.01% of the whole investment.