A basis point is one hundredth of one per cent (0.01 per cent), so 100 basis points (bps) is equal to 1 percentage point.
If a bond yield were to increase from 1 per cent to 2 per cent, it is said to risen by 100 basis points (bps) or one percentage point.
A common confusion would be to describe the increase above as a 1 per cent rise, rather than a one percentage point rise. Using basis points (bps), or "bips" as they are known colloquially, avoids any ambiguity.[1]
Bond spreads, the difference between bonds of similar quality and different maturities, or of different quality and the same maturity, are usually expressed in basis points (bps). Basis points are also used to express percentage changes in costs or prices of other securities, such as mortgage loans.