Cantor Fitzgerald Strikes Back

A subpage of The U.S. Real Term Structure
by J. Huston McCulloch
Department of Economics, Ohio State University

In an heroic act of defiance against the Sept. 11 attacks on the World Trade Center, Cantor Fitzgerald, the principal inter-dealer broker in the U.S. Treasury bond market, had its eSpeed system up and running on Sept. 13, thereby allowing the Treasury bond market to reopen two days before the stock market, despite having lost 657 of its 1000 personnel housed on the top floors of the north tower. Cantor personnel in London reportedly worked around the clock to get the system back in operation.

Thanks to a prompt evacuation after the first plane hit, Morgan Stanley, one of the principal dealers in the U.S. Treasury bond market and the largest single tenant in the Center, lost only 15 of its 3500 employees stationed there according to early Wall St. Journal reports, despite the fact that some of its floors in the south tower took the direct hit of the second plane.

By the end of September, the full spectrum of Treasury issues was being reported in the Wall St. Journal. The only evidence that the market was not completely back to normal was that most bonds were being quoted in the financial press with spreads of 3/32 per $100 of face value, rather than 1/32 for the most liquid on-the-run issues or 2/32 for most other issues, as was typical before the attack. Although not quite as liquid as before the 11th, this was still a remarkably liquid market. By the end of November, reported spreads were down to 1/32 or less (occasionally reported as 0/32, but presumably 1/64 in fact) across the board, representing an actual increase in liquidity from before the 11th.