Bond markets back to normal after financial reform scare

Bond issuers were paralyzed last week in the first real-world snag to come out of the new financial rules. Things were in such disarray that Ford's financing unit abandoned a $1 billion deal to issue new debt.

So the Securities and Exchange Commission stepped in late last week to ease the market. Did it work?

Certainly looks that way. The Ford deal is back on. And other bundlers of consumer loans who were holding back last week are getting back on track with their plans to issue new debt on the public market.

"The market has gone back to normal," said Paul Jablansky, a senior debt strategist for RBS.

Things weren't working last week because the new financial law suddenly exposed ratings agencies to potential lawsuits anytime bond issuers use the agencies' opinions when introducing new products and those opinions turn out to be wrong. The agencies balked and told asset-backed bond issuers they couldn't use their opinions anymore when registering new securities. Trouble is, those issuers are required by law to use those opinions in their documents. And so a stalemate emerged.

The SEC is letting issuers register their new products without citing ratings, at least for six months. But once that time runs out, bond issuers and ratings agencies may be back at an impasse.

If ratings agencies are worried today about being sued for opinions used in the marketing of new products, they're still going to be worried in six months.