What is the definition of Basis Point?

The basis point is the smallest measure used in quoting yields on bonds, notes, bills or mortgages. One basis point is equal to 0.01 percent or one one-hundredth of a percent of a yield. One hundred basis points are equal to 1% of the yield.

To illustrate, when you say that a bond's yield has decreased from 8.50% to 8.00%, that bond's yield has dropped by 50 basis points. Meanwhile, a bond whose yield to maturity increases from 9.00% to 9.25% has moved 25 basis points in yield.

Basis points are commonly used in the banking and insurance industries, as these make use of investment vehicles such as notes and bonds.

• Reinstatement
• Registered Principal
• Liquor Liability
• Businessowners Policy (BOP)
• Directors and Officers Liability Insurance