What Are Basis Points Used For? - TheStreet Definition

Dictionary of Financial Terms

A basis point is a hundredth of a percentage point, or 0.01% -- a key concept in discussing bond yields. The term is used mainly when quantifying changes in yields, or the difference in yield between two bonds.

For example, say that a bond's price drops, causing its yield to rise from 6% to 6.10%. One would say its yield rose by 10 basis points.

Another example: Say one bond has a yield of 6.5% and another has a yield of 6.75%. The difference can be expressed as 25 basis points.

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