Basis Point Law and Legal Definition

Basis Point is One hundredth of a percentage point (0.01%). It is used especially in expressing variations in the yields of bonds. Fixed income yields vary often and slightly within one percent and the basis point scale easily expresses these changes in hundredths of 1%. It is frequently but not exclusively used to express differences in interest rates of less than 1% pa. It avoids the ambiguity between relative and absolute discussions about rates. For example, the difference between 12.83% and 12.88% is 5 basis points.