Basis Point (BPs)
Basis points, often abbreviated as bps, are a unit of measurement used to represent small percentages in financial contexts. One basis point is equal to 0.01%, or one-hundredth of a percentage point. It is commonly used to express changes in interest rates, bond yields, or investment returns. For Example: If a bond's yield increases from 3.25% to 3.75%, it has risen by 50 basis points (bps), indicating a half-percentage point increase. Similarly, if an investment manager outperforms the market by 150 bps, it means they achieved a return 1.5% higher than the benchmark index.