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A unit of measurement equal to one-hundredth of a percentage point (0.01%), commonly used to express changes in interest rates and bond yields.
Basis points (bps, pronounced "bips") eliminate ambiguity when discussing rate changes. Saying a rate "increased by 50 basis points" is clearer than saying it "increased by 0.5%." When the Federal Reserve raises rates by 25 basis points, it means rates go up by 0.25%. One full percentage point equals 100 basis points. This precision matters enormously in fixed income markets, where small rate changes can translate into large dollar amounts on billion-dollar portfolios.