basis point

noun

|Updated on: 16 Jul 2018

Definition of basis point

: one hundredth of one percent (as in the yield of an investment)

Recent Examples of basis point from the Web

Turkey’s central bank responded to a sharp drop in the lira Wednesday by delivering a 300 basis point rate increase.

— ira iosebashvili, WSJ, "Dollar Slides Lower in Aftermath of Fed Minutes," 24 May 2018
That works out to around 0.4 percent of assets per year, or 40 basis points — more than 40 times what MCM charged for the stock fund, and more than 10 times its bond fund fee.

— joseph n. distefano, Philly.com, "SERS moves $600M out of index funds to buy foreign stocks, hedge fund," 8 Feb. 2018
Germany’s 10-year yield declined four basis points to 0.36%, hitting the lowest in almost three weeks with its sixth straight decline.

— Fortune, "Stock Markets Are Falling Around the World as Fears of a U.S.-China Trade War Grow," 19 June 2018
The spread on Pemex's $3 billion bond due in 2027 over similar-maturity Treasuries has widened by 86 basis points since Feb. 1 to 3.25 percentage points, as Lopez Obrador built up his lead in polls.

— justin villamil, Houston Chronicle, "Will Mexico's presidential election undo energy market reforms?," 16 Apr. 2018
Bonds The yield on 10-year Treasuries declined two basis points to 2.86 percent.

— Bloomberg.com, "Stocks Close Lower Before Inflation, Retail Data: Markets Wrap," 11 Mar. 2018
After retracing somewhat, the July contract is now printing about 22 basis points above the Fed effective rate of 1.70 percent.

— BostonGlobe.com, "Bond traders brace for major moves in aftermath of Fed meeting," 12 June 2018
By May 23rd the gap between the yields on Italian and German government ten-year bonds, which reflects concern over Italy’s ability to service its public debt, had grown to more than 190 basis points from 114 on April 24th.

— The Economist, "A bizarre new government takes shape in Italy," 24 May 2018
Rising rates isn't exactly a new problem for markets — the 10-year yield jumped 30 basis points in January alone — but this time the rise is driven by surging commodity prices, not heady economic gains.

— bloomberg, latimes.com, "How 3% Treasury yields could reshape the investing landscape," 23 Apr. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'basis point.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of basis point

1962

in the meaning defined above

See Words from the same year

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Financial Definition of BASIS POINT

basis point

noun

What It Is

A basis point is one hundredth of one percent.

How It Works

There are one hundred basis points in one percent.

Let's say Bank XYZ pays 2.54% interest on its savings accounts. A month later, it raises the rate to 2.75%. We would say that rate increased by 21 basis points.

Why It Matters

Basis points are in anything that is expressed as a percentage: interest rates, rates of return, bond coupons, rates of change and much more. Because tiny changes can have big effects, it is no surprise that the markets are concerned about hundredths of a percent.

Source: Investing Answers