A basis point (abbreviated bp) equals 0.01 percentage point. One hundred basis points make up one percentage point. The unit was introduced to eliminate ambiguity: the phrase "the rate increased by 5%" could mean a rise from 14% to 14.7% or from 14% to 19%, while "the rate increased by 500 basis points" has a single, unambiguous meaning.
Basis points are used to measure central bank decisions on the key rate, changes in bond yields, spreads between issues, commission sizes, and loan rate markups.
For bond investors, basis points have direct monetary value: the longer the time to maturity, the more the security's price responds to a yield change of 50 or 100 bp. This is why debt market quotes are discussed in basis points rather than as percentages of a percentage.