Basis Points¶
OVERVIEW¶
A basis point — abbreviated bp, pronounced bip (plural bips) — is a unit equal to 1/100th of a percentage point, or 0.0001 in decimal terms.
Tapeboard displays rate changes, spread moves, and cost comparisons in basis points throughout the terminal. Understanding the unit is prerequisite to reading any fixed-income, credit, or macro data feed correctly.
Why not percentages?
A bond yield moving from 4.35% to 4.42% is a 7 bp move. Calling it a "7% increase" is mathematically wrong — that phrasing implies the yield rose 7% of its own value (to ~4.66%). Basis points remove that ambiguity entirely.
CONVERSION REFERENCE¶
| Unit | Decimal | Percentage |
|---|---|---|
| 1 basis point | 0.0001 | 0.01% |
| 10 basis points | 0.0010 | 0.10% |
| 25 basis points | 0.0025 | 0.25% |
| 50 basis points | 0.0050 | 0.50% |
| 100 basis points | 0.0100 | 1.00% |
To convert percentage-point change → basis points:
To convert basis points → percentage:
Quick check
A rate rising from 3.75% to 4.00% is a 25 bp move — not a 6.67% increase, not 0.25%. Always use the percentage-point delta, then multiply by 100.
WORKED EXAMPLES¶
| Scenario | Move | Basis Points |
|---|---|---|
| Fed funds rate cut (June 2026 FOMC) | 3.75%–4.00% → 3.50%–3.75% | −25 bp |
| Investment-grade corporate bond spread | Treasury + 1.20% over 10-year | +120 bp |
| Index ETF expense ratio | 0.03% annual cost | 3 bp |
| Actively managed fund expense ratio | 0.75% annual cost | 75 bp |
Dollar impact requires notional
A 10 bp move on a $10,000 position = $10. The same 10 bp move on a $10 billion book = $10 million. Tapeboard's P&L panels always display notional alongside bp moves for this reason.
WHERE TAPEBOARD DISPLAYS BASIS POINTS¶
| Panel | Basis Point Context |
|---|---|
| Rate Monitor | Fed funds target range changes; central bank decisions |
| Credit Spreads | Corporate bond spreads quoted over relevant Treasury benchmark |
| Yield Curve | Curve steepness and point-to-point moves across tenors |
| Fund Screener | Expense ratios compared across ETFs and active funds |
| FX Carry | Rate differentials between two currencies' benchmark rates |
| Repo Desk | Overnight and term repo rate moves |
LIMITATIONS AND COMMON MISCONCEPTIONS¶
Magnitude is always context-dependent
25 bp is a routine, almost boring Fed move. The same 25 bp would be an enormous single-day move for a broad equity index. The raw number means nothing without the instrument and timeframe.
Key limitations to keep in mind:
- Basis points do not imply dollar impact on their own — you always need the notional amount to translate a bp move into cash terms.
- Stacking bp changes is not strictly additive when compounding is involved across multiple periods or meetings. For single discrete rate changes, simple additive math holds.
- Basis points measure change or spread, not level — a security "at 120 bps" is describing a spread over a benchmark, not an absolute yield.