Basis point: Difference between revisions
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While bond coupons may be expressed in fractions (for example, quarters, eighths or sixteenths), yields and prices of most money market instruments, such as commercial paper or treasury bills, are quoted in basis points. | While some bond coupons may still be expressed in fractions (for example, quarters, eighths or sixteenths), yields and prices of most money market instruments, such as commercial paper or treasury bills, are quoted in basis points. | ||
Revision as of 11:04, 29 October 2016
(bp).
1.
Interest rates.
One hundredth of 1%
= 0.01%
= 0.0001 as a decimal.
For example, an increase of three basis points (0.03%) from a starting rate of 2%, would give an increased rate of 2.03%.
One hundred basis points are 1%.
An increase of 3%, say from 2% to 5%, would be an increase of 300 basis points.
2.
While some bond coupons may still be expressed in fractions (for example, quarters, eighths or sixteenths), yields and prices of most money market instruments, such as commercial paper or treasury bills, are quoted in basis points.
3.
Foreign exchange rates.
One hundredth of a cent, for example $0.0001, or its equivalent in other currencies.
Often, but not always, this represents a minimum price movement in the related foreign exchange rate quotation.
