A basis point is one hundredth of one percentage point: 0.01%. It is the standard unit for talking about interest rates and yields, because rates often move in small amounts and percentages can be ambiguous. People write it as “bp” or “bps” and often say “bips.”
The conversions
| Basis points | Percentage points |
|---|---|
| 1 bp | 0.01 |
| 5 bp | 0.05 |
| 10 bp | 0.10 |
| 25 bp | 0.25 |
| 50 bp | 0.50 |
| 100 bp | 1.00 |
To convert percentage points to basis points, multiply by 100. To go the other way, divide by 100.
Why not just use percent?
Because “percent” can mean two different things. Suppose a yield goes from 4.00% to 4.40%. You could say it rose 0.40 percentage points, or you could say it rose 10%, since 0.40 is 10% of 4.00. Both are correct, but they sound completely different. Saying the yield rose 40 basis points is unambiguous.
Where you’ll see basis points
- Daily rate changes. Our rates dashboard shows each day’s change in percentage points and basis points.
- Yield spreads. The difference between two yields is almost always quoted in basis points. If the 10-year yields 4.20% and the 2-year 3.80%, the spread is 40 bp. Try the Treasury Spread Calculator.
- Federal Reserve decisions. Policy rate changes are typically described as 25 or 50 basis points.
- Loans and fees. A loan priced at “the benchmark plus 150 bp” costs 1.50 percentage points over that benchmark; fund expense ratios are also often quoted in basis points.
Negative basis points
A negative number means a decrease or, for spreads, that the first yield is lower than the second. A spread of −30 bp between the 10-year and 2-year means the 10-year yields 0.30 percentage points less, an inverted curve between those maturities.
Worked examples
- The 10-year yield moves from 4.18% to 4.23%: up 5 basis points.
- The 3-month rate falls from 4.30% to 4.05%: down 25 basis points.
- A savings account pays 50 bp more than a T-bill yielding 4.00%: the account pays 4.50%.
These are example numbers, not current rates.
Key takeaways
- 1 basis point = 0.01 percentage point; 100 basis points = 1 percentage point.
- Basis points avoid confusion between percentage-point and percent changes.
- Rate changes and spreads are usually quoted in basis points.