Price Value of a Basis Point - PVBP

Bonds have two modes of measuring their value. There's the price of the bond: the amount you would pay to buy it on an open exchange. And there's the interest rate. That figure represents the amount the holder of the bond earns in interest.

PVBP measures the relationship between these two figures. How much does a bond's price react to changes in its interest rate (also known as the yield)?

A basis point measures one hundredth of a percent. So if the yield on your bond rises from 5% to 6%, it rises 100 basis point. A further increase to 6.5% would represent an advance of 50 additional basis points. And so on.

Price value of a basis point shows how sensitive the bond's price is to changes in yield. Increase the yield by a basis point, and how much does the price rise? Answer that question, and you get the PVBP for that bond.