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Username: Peter

Rating:
Guru Stars

Asked to: Goro Yang

Date Created: 07 Mar 2017
Category 17
Tag Financial
Question Please give the definition of 'Beep'.
Advice from Guru
Hello Peter,

"Beep" is financial industry jargon for basis point, which is 1/100 of a percentage point in the context of interest rates, bond yields and other debt instruments. The term came into popular usage as an easier way of referring to the basis points as bps. Because basis points express percentages of change, not dollars, they have limited use in quoting stock prices.

Beeps are used when discussing debt instruments because the loans can change in small segments. Bonds and loans come with stated interest rates that may change by 10 or 50 beeps. This affects the bonds' true yields and the loans’ true costs.

When converting beeps to percentages, multiply the number of beeps by 0.0001. For example, an investor is following a bond with a price increase of 225 beeps. Because the investor wants to know the percentage of change, he multiplies the 225 beeps by 0.0001 and discovers 0.0225, or 2.25%, is the amount of the price increase.

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