Yellow Sheets

Yellow Sheets — what they are and how they work

Yellow sheets are market bulletins that list corporate bonds traded over-the-counter (OTC). They provide traders and brokers with quote and trading data for bonds issued by companies that are not listed on a national exchange.

What information appears on yellow sheets

Typical data included:
* Security identifiers and issuer name
* Yield, high, low, and closing prices
* Volume and recent trades
* Bid and ask quotes (bid–ask spread)
* Contact information for broker–dealers or market makers that quote the bond

The OTC Markets Group (formerly the National Quotation Bureau) publishes yellow sheets electronically in real time. The term mirrors the historical printed “yellow” bulletins; the same publisher also issues “pink sheets” for OTC stocks.

How trading works on the yellow sheets

• OTC trading is decentralized: dealers and market makers trade through a network rather than a single exchange.
• Market makers listed in the yellow sheets post quotes and can be contacted directly to negotiate trades.
• Subscribers use the bulletin’s contact information to arrange purchases or sales through broker–dealers that make markets in a given bond.

Characteristics and risks of yellow-sheet bonds

Bonds listed on yellow sheets tend to carry higher risk and different market dynamics than exchange-listed bonds:
* Issuer reporting and oversight — Many issuers are not listed on major exchanges and therefore may have less stringent reporting and regulatory requirements.
* Credit/default risk — The issuer may be smaller, less established, or financially weaker, increasing default risk.
* Liquidity risk — There may be few or no ready buyers, making it hard to sell quickly or at a favorable price.
* Wider bid–ask spreads — Market makers widen spreads to compensate for credit and liquidity risk, increasing transaction costs.

Some foreign companies use OTC markets to list in the U.S. (often via American Depositary Receipts), but the general risk and liquidity considerations still apply.

Brief history

• The National Quotation Bureau (NQB) originated in 1913 and published paper bulletins on colored paper: pink for stocks and yellow for bonds.
• Over time the NQB evolved into an electronic quotation service and rebranded as OTC Markets Group; electronic publication has been standard since 1999.

Practical considerations for investors

• Conduct thorough credit and issuer due diligence before buying an OTC bond.
• Check recent trade volume and bid–ask spreads to assess liquidity and transaction costs.
• Use the broker contact information in the yellow sheets to confirm current quotes and execution procedures.
• Evaluate suitability relative to your risk tolerance and portfolio objectives — OTC bonds can offer yield but come with higher default and liquidity risks.

Key takeaways

• Yellow sheets are real-time OTC bulletins for corporate bonds, published by OTC Markets Group.
• They list quote, trade, and broker contact information for non-exchange-listed bonds.
• Bonds on yellow sheets typically carry higher credit and liquidity risk and wider spreads; investors should perform careful due diligence and confirm quotes with market makers.