General TradingB

Basis Point

A unit of measurement equal to one-hundredth of one percentage point (0.01%), commonly abbreviated as bps and pronounced 'bips.' Basis points are the standard unit for expressing changes in interest rates, bond yields, and other percentage-based financial metrics because they eliminate ambiguity between absolute and relative percentage changes. For example, when a central bank raises rates from 5.00% to 5.25%, the increase is described as 25 basis points rather than a potentially confusing 0.25% increase.

Example

“The Federal Reserve raised the federal funds rate by 75 basis points in a single meeting, its most aggressive hike in decades, sending bond yields sharply higher.”