Basis refers to the difference between the spot price and the futures price, usually the spot price minus the futures price. Basis rate is the ratio of basis to spot price, usually expressed as a percentage. For example, the current basis is 10%, which means that the spot price is higher than the futures price by 10%. If this basic interest rate is increased by 25%, the new basic interest rate will become 35%( 10%+25%). This means that the spot price has a higher premium than the futures price.
In the commodity market, the change of basis rate is usually influenced by many factors, including the relationship between supply and demand, market expectations, policies and regulations. When the basis increases, it usually means that the spot supply in the market is tight or the market is expected to be optimistic in the future. On the contrary, when the basis decreases, it may mean that the spot supply in the market is sufficient, or the market expectation in the future is not very optimistic.