What is 'Yellow Sheets'

Yellow sheets are bulletins which contain information about the price of corporate bonds on the over-the-counter (OTC) market. Yellow sheets provide information such as a bond’s high, low, closing price and yield. It will also state a bond’s bid price and ask price. 

The OTC market is a decentralized way of trading securities.  Dealers on the OTC market do not require a physical location or central exchange to buy and sell securities. Because of this, the yellow sheets provide contact information for brokerages that make a market for these bonds.

BREAKING DOWN 'Yellow Sheets'

Because the OTC is decentralized, the yellow sheets do not represent one specific trading platform or market. Instead, they are a bulletin that is available in hard copy or online for subscribers. If a subscriber wants to purchase a particular bond, they may use the contact information in the yellow sheets to contact the appropriate brokerage.

Yellow sheets serve the same function as the pink sheets that provide quotes for stocks listed on public exchanges. However, yellow sheets provide information for bonds issued by companies not listed on a national exchange. 

These non-listed companies may be small or still establishing themselves and may not meet the listing requirements for the national exchanges. However, they may, nevertheless, sell bonds to raise money for operations. Listing these bonds through the yellow sheets helps get information to a broad audience of investors.

Bonds listed in the yellow sheets can be considered riskier than other fixed-income securities. This higher risk is due to the selling company being under-established for listing on a regular exchange, but there are many other risks to consider before investing. 

  • Investors should consider the chance that the company may fail and default on the bonds.
  • These bonds will not trade actively due to the small market to which they will appeal.
  • If the bondholder decides that they want to sell the bond, they may have a difficult time finding someone interested in purchasing it.

Yellow Sheets and the National Quotation Bureau

The National Quotation Bureau (NQB) was established in 1913 to help provide investors with information regarding OTC stocks and bonds. Historically, the NQB published information on different colors of paper, and these bulletins carried the same name as the paper color. Stock quotes appeared on the pink sheets, and bond quotes were published on the yellow sheets.

In 1963, the NQB sold to Commerce Clearing House, which sold it again in 1997. In 1999, the NQB transitioned from printing its famous colored paper bulletins to operating as a primarily electronic operation. The NQB has since changed its name to OTC Markets Group.

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