A basis point (bp, plural bps, pronounced "bip") equals 0.01%, or one hundredth of a percentage point. It is the standard unit of measure for interest rates, yield changes, and spreads in fixed-income markets.
The convention exists because rate changes are often small in absolute terms but significant in market impact. Saying "the 10-year yield rose 5 basis points" is unambiguous. "The yield rose 0.05 percent" is not, because it could mean a 0.05 percentage point move or a 0.05% proportional increase on whatever the starting yield was. Basis points remove that ambiguity, which is why dealers, portfolio managers, and central banks quote everything in bps.
| Basis Points | Percentage | Decimal |
|---|---|---|
| 1 bp | 0.01% | 0.0001 |
| 25 bps | 0.25% | 0.0025 |
| 100 bps | 1.00% | 0.0100 |
| 500 bps | 5.00% | 0.0500 |
A yield of 4.25% equals 425 bps. A Fed hike of 75 bps equals 0.75 percentage points. The decimal form (0.0001 per bp) is what you plug into pricing formulas.
The practical importance of basis points becomes clear when you size the dollar impact of a yield move. The DV01 of a bond measures its price sensitivity to a 1 bp shift in yield.
For a 10-year Treasury note priced at par with a yield of approximately 4.50%, the modified duration is roughly 8.1 years. The DV01 per $100 face value is:
DV01 = (ModDur × Price) / 10,000 = (8.1 × 100) / 10,000 = 0.081 per 100 face value
For a $10,000,000 position:
DV01 = 10,000,000 × 0.081 / 100 = 8,100 per basis point
That means a 10 bp selloff costs the holder roughly 81,000 in mark-to-market P&L on a 10M position. A 50 bp move, which is a single Fed decision, costs 405,000. At institutional scale, every basis point has a concrete dollar tag.
YCP displays real-time 10Y yield levels on /levels so you can track these moves as they happen and size your exposure accordingly.
Treasury auction results are quoted in basis points, and reading them correctly tells you how much demand showed up and at what price.
The auction tail is the difference, in bps, between the auction stop-out yield and the pre-auction when-issued (WI) yield. A tail of +1.2 bps means the auction cleared 1.2 bps cheaper than the WI market expected. A tail signals weak demand. A negative tail (through) means the auction stopped through the WI, indicating strong demand.
Bid-to-cover tells you how many times the offering was oversubscribed. The tail tells you the price the market required. You need both numbers to assess an auction properly. A high bid-to-cover with a large positive tail is unusual and warrants scrutiny of the dealer takedown percentage.
YCP tracks auction results on /auctions, including bid-to-cover ratios, stop-out yields, and historical tails by tenor.
Basis points are used across every layer of fixed-income analysis:
Percentages create ambiguity. If a yield moves from 4.00% to 4.05%, saying "it rose 0.05%" is unclear. That phrasing could mean a 5 bp absolute move or a 1.25% proportional increase (0.05 / 4.00). Basis points refer only to absolute moves in percentage point terms, eliminating that ambiguity entirely. Every market participant reads "+5 bps" the same way.
The standard increment is 25 bps. The Fed also uses 50 bp moves in either direction for larger adjustments, and 75 bp moves have occurred at particularly aggressive tightening episodes, including four consecutive 75 bp hikes in 2022. The Fed funds target range is always expressed as a range in bps (for example, 425-450 bps during the 2022-2023 tightening cycle peak).
A tick is a market-specific minimum price increment, not a fixed unit of yield. Treasury futures trade in ticks of 1/32 of a point, which equals 0.03125% of face value. A basis point is always exactly 0.01% of yield. The two units measure different things and should not be conflated.