What Are Yellow Sheets?
Let me explain what yellow sheets are: they're bulletins designed for bond traders, containing crucial information on corporate bonds traded on the over-the-counter (OTC) market. You'll find data like each bond's yield, volume, high, low, closing price, and bid-ask spread in these sheets.
These yellow sheets come from the OTC Markets Group, which used to be known as the National Quotation Bureau (NQB). They also publish pink sheets, which provide similar data but for stocks trading over-the-counter.
Since 1999, both yellow and pink sheets have been distributed electronically in real-time, making it easier for you to access the information.
In simple terms, yellow sheets are bulletins that inform you about corporate bonds available through brokerages for OTC trades. Pink sheets do the same for OTC stocks. Today, both are electronic services from the OTC Markets Group, listing securities from companies not on major public exchanges.
Understanding Yellow Sheets
Yellow sheets give you details on bonds issued by companies that aren't listed on a national exchange. These companies might be small, not well-known, or still building their business, and many don't meet the requirements for public exchange listings.
The OTC market is decentralized, meaning dealers aren't operating from one physical location or centralized market. Yellow sheets include contact information for brokerages that make a market for these bonds.
You can access yellow sheet bonds through a network of market makers via a closed network, either in hard copy or online if you're a subscriber. If you want to buy a specific bond, use the contact info in the yellow sheets to reach the right brokerage.
Yellow-Sheet Bonds
Bonds listed in the yellow sheets are typically riskier than other fixed-income securities. The issuing companies aren't on any public U.S. stock exchange, so they skip the strict government regulations and disclosure rules that listed companies follow.
That said, some established foreign companies do list in the U.S. via OTC markets, often as American Depositary Receipts (ADRs).
You'll notice wider bid-ask spreads for these yellow sheet bonds to account for the risks. The biggest risk is the company failing and defaulting on the bonds, plus there's liquidity risk—there might be no market if you need to sell.
Yellow Sheets and the OTC Markets Group
The National Quotation Bureau (NQB) started in 1913 to give investors info on OTC stocks and bonds. Back then, they printed on colored paper, leading to names like pink sheets for stocks and yellow sheets for bonds.
In 1963, Commerce Clearing House bought the NQB. By 1999, they shifted from paper bulletins to mostly electronic operations, and later renamed to OTC Markets Group.
