What Are Basis Points (BP)?

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A Basis Point measures the change in interest rates and other percentages. Find out more about it in this article.
  • A Basis Point measures the change in interest rates and other percentages.
  • They are often referred to as "Beeps".

A BP is equal to 0.01%, and therefore if we refer to the example of the Federal Reserve, which for example plans to increase interest rates by 25 basis points, then this indicates that there would be an increase of 0.25%.

Basis points are also used for loans and bonds. For example, your bank may offer you the possibility of receiving a reduction of 50 basis points on your loan, which simply means that the bank will reduce the current interest rate on your loan by 0.5%.

On the other hand, if you know that the yield on a bond will decrease by 100 basis points, then it means that its yield will lose 1%.

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