A basis point (bp or bps) is a unit of measure equal to 1/100th of a percent: 1 bp = 0.01% = 0.0001 (decimal). Markets use basis points to express very small changes in interest rates, yields, fees and spreads so communication is precise and unambiguous. You'll often see "bps" in headlines such as "RBA hikes by 25 bps" or in bond quotes where a few basis points matter to traders and borrowers.
Using basis points avoids misreading and rounding errors when dealing with small rate moves:
If you're comparing central bank decisions or bond yields, basis points make comparisons straightforward.
Memorise these core relationships and you'll convert quickly:
Simple formulas:
Cheat-sheet conversion table
| Basis points (bps) | Percent (%) | Decimal |
|---|---|---|
| 1 | 0.01% | 0.0001 |
| 5 | 0.05% | 0.0005 |
| 10 | 0.10% | 0.0010 |
| 25 | 0.25% | 0.0025 |
| 50 | 0.50% | 0.0050 |
| 100 | 1.00% | 0.0100 |
Practical conversions and visible effects on common products.
Suppose the central bank signals a 25 bps (0.25 percentage point) increase. If the prevailing cash rate was 3.10%, the new rate is:
That 25 bps change is meaningful for short-term money markets and influences the entire yield curve. For details on mortgage rate impacts, see relevant mortgage guides.
Your variable mortgage rate is 3.20%. A lender raises it by 15 bps (0.15%). New rate:
Rough monthly payment impact (high-level): for a principal of AUD 500,000 over 25 years, a small rate rise increases the interest portion of each payment. Use a loan calculator for exact amortisation.
An investment fund charges 50 bps management fee:
PVBP (also called DV01) is the approximate dollar change in a bond's price for a 1 basis point move in yield. It's a practical measure of interest-rate sensitivity used by investors and traders.
Use this approximation:
PVBP ≈ 7 × 1,000,000 × 0.0001 = 700 → AUD 700
Interpretation: if yields rise by 1 bp, the bond's market value falls by approximately AUD 700; a 10 bp move ≈ AUD 7,000. Duration and yield curve mechanics are complex — consult financial literature for deeper context.
Notes:
Bonds and yields: Yield changes are quoted in bps; risk managers use PVBP/DV01 to hedge exposure.
Credit spreads: Corporate spreads over government yields are expressed in bps (e.g., a 120 bps spread).
Bank lending & mortgages: Margins and cash-rate moves are communicated in bps; lenders may change margins in bps.
Fees and expense ratios: Fund fees are commonly quoted in bps (e.g., 75 bps = 0.75%).
Derivatives and swaps: Swap rates and basis swaps are quoted in bps; small moves can represent large P&L for leveraged positions.
When reading market commentary, check whether numbers are in bps or percent — misreading here is a common source of error.
Copy-paste helpers you can run locally.
// bps to percent and decimal
function bpsToPercent(bps){ return bps/100; } // percent
function bpsToDecimal(bps){ return bps/10000; } // decimal
// percent to bps function percentToBps(pct){ return pct*100; }
// PVBP approximation: modifiedDuration (years), notional (AUD)
function pvbp(modifiedDuration, notional){
return modifiedDuration * notional * 0.0001;
}
// Example: pvbp(7, 1000000) => 700
50 bps = 0.50% = 0.005 (decimal).
Yes — 100 basis points = 1%.
A 25 bps (0.25%) increase raises the nominal rate by that amount; monthly payment impact depends on balance, term and amortisation — use a loan calculator for exact figures.
They describe the same idea (dollar change for a 1 bp move); naming varies by desk. DV01 emphasises "dollar," PVBP emphasises "price value."
Traders compute PVBP for positions and take offsetting PVBP in hedging instruments (futures, swaps) so net PVBP ≈ 0.
Yes — fund fees and management charges are commonly quoted in bps to convey small percentage charges clearly.
Convert bps to percent by moving the decimal left two places: 25 bps → 0.25%. To convert percent to bps, move decimal right two places: 0.35% → 35 bps.
Central banks, debt managers and regulators publish glossaries and yield data — see the RBA, AOFM and ASIC resources linked below.
Basis points are a simple but essential unit in finance for expressing small rate changes, fees and spreads clearly. Keep the quick conversion rules handy (bps ↔ percent ↔ decimal), check units before calculating, and use calculators or the PVBP rule-of-thumb for bond sensitivity—these steps will help you interpret market moves and the impact on loans and investments.
This article is general information only and is not legal, tax or financial advice.