Basis Point
One hundredth of a percent: the unit central banks and bond traders think in.
A basis point is 0.01%: 100 make 1%. Rate moves, yields and spreads all quote in basis points for precision.
A basis point is one hundredth of one percent: 100 basis points make 1%. Central banks move rates in 25-point steps, bond yields quote in points, and traders say fifty bps instead of half a percent because precision prevents expensive misunderstandings.
How It Works
- 100 basis points equal one percent
- Rate decisions land in 25-point steps
- Expectations reprice in points before meetings
Trading Tips
Translate headlines to points instantly: 0.5% is 50bps
Watch expected versus delivered points around decisions
Bond traders live in points; think like them
Basis Point Example
Say markets price 75 basis points of cuts this year and the Fed delivers 25. The 50-point gap between hope and reality reprices the dollar higher for weeks. Points expected minus points delivered equals the trade.
How Traders Use Basis Point
Track rate expectations in points on a running sheet. Surprises measured in points convert directly to pip expectations on dollar pairs.
Related Terms
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