Pound symbol / Hash sign (#) (Notes) grays out before space

Within Notes…

All of a sudden, my pound sign (#) is grayed out before I enter a space.

And if I keep typing, it turns the hash sign and what comes after yellow.

At first, it was changing to a #3 bullet when I pressed the space key.

I checked “text replacement” but there was nothing there to indicate a replacement. With text replacement however, I entered to replace “#” with “#” and then I deleted it. This seemed to get rid of the #3 bullet, but now the hash sign is greyed out before I press the space key.

It’s more of an annoyance as I can’t figure out how/why it changed.