Basis point is the smallest measure used in quoting yields on bonds or treasury bills. One basis point is 0.01% or one one-hundredth of a percentage point. Therefore, if a bond yields 6.50% and another bond yields 6.75%, the difference in the yields is 25 basis points. One hundred basis points add up to 1%. In other words, one basis point is 0.01%. You might use basis points to compare the differences in bond yields. Again, if your bond fund’s yield was 7.5% and your friend’s was 7.3%, you’d say your fund yielded 20 more basis points.
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