By Gayl Mileszko
Market Commentary
Home of the Brave
For many Americans, this is a week for looking back in time, a whole generation back, 25 years, back to the collapsing towers, the dust cloud and smoke plume so large that it was visible from space, the posters and candles and vigils, the 24/7 operations that ran for 261 straight days at the 16-acre site labeled Ground Zero, the 20 survivors, the buckets, the 108,000 truckloads and 1.8 million tons of wreckage removed, the last steel beam. We remember the grounding of 4,500 airplanes for 3 days, the weeks of cheering alongside Hero Highway as first responders, bulldozers and dump trucks made their way to The Pile where fires burned at temperatures exceeding 1,600 degrees for 100 days, the “portraits of grief” published by the New York Times over next three months, the multiple funerals held day after day, week after week, the survivor tree, the sadness and patriotism that bound us together.
- The horror began at 8:48 am that day and, by 10:28, both towers had collapsed, the Pentagon was hit, the passengers on UA Flight 93 stormed the cockpit, and U.S. airspace was shut down. To repeat the count, so that no one forgets or fails to share, the magnitude: the four terror attacks killed 2,969 men and women and 8 children, ages 2-11. We lost 2,753 at the World Trade Center (including 99 on American Airlines Flight 11 from Boston and 65 on United Airlines flight 175 from Boston), 184 at the Pentagon and aboard American Airlines Flight 77 from Dulles, and 40 in Pennsylvania aboard United Airlines Flight 93 from Newark.
- We know that a total of 343 firefighters and 71 law enforcement officers perished in New York but, to this day, the New York City’s Office of Chief Medical Examiner has only been able to identify 60% or 1,654 of the WTC victims. The most recent ID was made just 17 days ago, on August 24. Sadly, the toll continues to grow: the 9/11 Victim Compensation Fund reports that more than 9,670 people have since died from 9/11-related toxic exposure illnesses.
- At the Pentagon and Shanksville, the Office of the Armed Forces Medical Examiner led the recovery and identification process. Among the casualties at the Pentagon were 55 military personnel. Remarkably, all 184 victims at the Pentagon and 40 at the Pennsylvania site were identified. Sadly, the toll continues to climb for first responders, recovery teams, FBI and military personnel and investigators exposed to the carcinogens, burning jet fuel and hazardous debris.
Extraordinary Efforts
While massive search and rescue operations began immediately in New York City and the Pentagon, yeoman’s efforts were made to get the very heart of global capital markets up and running again. Market leaders quickly tossed aside old assumptions on liquidity, insurance, and security. They rapidly arranged for the separation of primary and backup sites, duplication of data, remote-access capabilities, emergency communications, and the testing of recovery plans. The stock market did not fully re-open for four days and, during the course of that week, the Dow lost approximately 14.3 percent; at that time, it was the worst weekly percentage performance since the Great Depression. Also on September 17, the Federal Reserve cut its target rate by 50 basis points to 3%. The Fed had already been supplying extraordinary liquidity through the discount window and open-market operations, extended operating hours, facilitated check clearing and used currency swap arrangements to help foreign central banks meet dollar needs.
- Citizens from more than 90 nations lost their lives that day, so there was a global impact. The international reaction began before American exchanges reopened with European and Asian markets and the dollar all weakening. For the first and only time in history, NATO invoked Article 5 of its charter on September 12, declaring the attack on the U.S. an attack on all member states. Leaders worldwide declared national days of mourning,
Resilience
At 5pm on the afternoon of 9/11, firefighters hoisted a flag from the yacht Star of America on a makeshift pole amid the wreckage. It was quite a symbol of American resilience. The next day, firefighters and soldiers unfurled a massive garrison flag from the U.S. Army band at Fort Myer, Virginia, draping it from the roof of the Pentagon down the side of the damaged section of the building. Pennsylvania state troopers raised a 20×30 foot flag, once flown over the White House, at the top of a coal mining crane on a hilltop overlooking the crash site. Tens of millions of Americans displayed a flag at home, in the office or on their car and most still had them flying one year later.
- On March 11, 2002, the bronze sculpture commonly called The Sphere was reassembled and erected in Battery Park as an interim memorial.
Rebuilding
The repair and reconstruction of the Pentagon happened first. Approximately 400,000 square feet required complete structural demolition and rebuilding, but roughly two million square feet in total were affected. The Phoenix Project at the Pentagon restored the west facade and the three outer rings at the impact area. On August 15, 2002, employees began returning to rebuilt offices; five months later, all reconstruction of the damaged sections was officially complete.
- The 10-member National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) was created on November 27. 2002 and published its findings on July 22, 2004. They reported that the attack was perpetrated by 19 young Arabs acting at the behest of Islamic extremists. Eight recommendations were offered. The Department of Homeland Security reported as recently as May of this year that there is still work to do as the terrorist threats facing the country have evolved.
- In Pennsylvania, the first phase of the permanent Flight 93 National Memorial, including the Memorial Plaza and Wall of Names, was dedicated and opened on September 10, 2011. The National September 11 Memorial opened the next day. The visitor center at Flight 93 National Memorial opened September 10, 2015. On September 9, 2018, the 93-fooot Tower of Voices was dedicated in Shanksville. And on September 10, 2020, the 40 individual wind chimes were installed.
- In New York, construction of the 1,776-foot tower initially called the Freedom Tower, — now officially One World Trade Center — began on April 27, 2006. On May 23, 2006, 7 WTC opened. On November 13, 2013, 4 WTC Center opened. The 9/11 Memorial Museum opened in May 2014. The new One World Trade Center opened on November 3, 2014. The WTC Transportation Hub opened March 3, 2016. On August 16, 2017, The Sphere was moved and rededicated at Liberty Park. On June 11, 2018, 3 WTC reopened. The WTC Cortlandt Street Station and No. 1 subway line re-opened on September 8, 2018. The Perelman Performing Arts Center, occupying the site associated with 6 WTC, opened September 13, 2023.
Work Still in Progress
Twenty-two years later, the reconstruction of the WTC complex is still a work in progress. A ceremonial groundbreaking for 2 World Trade was just held on July 9 on the site of the old 5 WTC. When complete in 2031, it will be the global headquarters of American Express. The old 9-story black office building known as 5 WTC was demolished by December 1, 2001. Plans for a new mixed use tower Park at 130 Liberty Street were put on hold on March 18, 2026, by the Port Authority of New York and New Jersey as building material and construction costs spiked by as much as 50%, rendering the proposed project financially unsustainable.
Justice Remains Elusive for Some
Manhunts conducted under the Bush and Obama Administrations proceeded for years, and as many as 780 suspected al Qaeda and Taliban terrorists captured after the Afghanistan invasion were held at the Guantanamo Bay detention camp in Cuba. Osama bin Laden was killed on May 2, 2011, in Abbottabad, Pakistan, but legal proceedings against the primary 9/11 architect, Khalid Sheikh Mohammed, and several other captured co-conspirators, have been stalled for over 20 years. A plea agreement to spare principals the death penalty was quickly nixed. A military judge recently set a trial date for June 5, 2028.
Peace Elusive, Disruptions Intensify
The years since 2001 have not been peaceful ones. The war on terror kept us in Afghanistan for 20 years and led to our invasion of Iraq in 2003. We lived through Anthrax attacks and COVID, Hurricanes Katrina, and Sandy. Major companies including Enron, United Airlines, Lehman Brothers, General Motors declared bankruptcy. The nation was already in the midst of an 8-month recession; we later faced a severe, 18-month downturn as a result of the subprime mortgage crisis, and another in 2020, driven by pandemic-driven business shutdowns. There were tragic losses at Virginia Tech, Sandy Hook, the Charleston Church, the Tree of Life Synagogue, and the Boston Marathon.
- Technology has changed dramatically in the past 25 years, bringing progress and new connectivity as well as misinformation, privacy and mental health issues, and job losses. The introduction of the iPhone in 2007 ushered in an era of mobile banking, GPS navigation, and digital commerce. Facebook in 2004, followed by YouTube, Twitter, Instagram, and TikTok transformed communications, marketing, politics, entertainment, and news consumption. Drones have transformed the modern battlefield. Hybrid and remote work models have accelerated. Alternative education in the form of charter schools, online learning and other instructional approaches have expanded school choice. Cloud computing, gene editing, reusable rockets, and the Tesla Roadster have all changed our way of life during the past two decades.
- Some trends have snuck up on us, and some events have shocked us once again. China has grown into a global superpower. Populations around the globe are rapidly aging and birth rates have plummeted. Cybersecurity concerns have risen to the fore in our data-oriented economy. Politics have become polarized. Demonstrators and rioters forced their way into the Capitol in an attempt to prevent the joint session of Congress from counting and certifying the 2020 Electoral College votes. The House voted to remove its speaker and required 22 days to elect a new one. The government shut down for 35 days in a standoff over funding for a wall on the U.S.–Mexico border. The Supreme Court overturned Roe vs Wade and legalized same-sex marriage. The House voted twice to impeach a president who was later indicted four times in four states.
Financial Market Impact
The seven WTC buildings held one of the world’s densest concentrations of banks, broker-dealers, clearing operations, telecommunications networks, and financial market personnel. As many as 50,000 people worked in the complex on a typical day with another 200,000 passing through the complex daily as commuters, diners, shoppers, and visitors. The human loss was — and still is — unimaginable. Cantor Fitzgerald, then a major dealer in U.S. government securities headquartered on floors 101 to 105 of the North Tower, lost 658 employees on 9/11.
- There was also massive operational shock. On 9/11, normal communication lines went down, and so many records were destroyed that billions of dollars of settlements could not be reconciled. The municipal bond market never actually closed but trading was severely disrupted for several days. Trading in corporate and government securities effectively ceased for two days while alternative routing systems and remote infrastructure were arranged. Commodities, futures, and options trading in Chicago resumed in stages within days but the physical infrastructure in New York was derailed for a week.
The Municipal Bond Market Since 9/11
Muni traders who retired soon after 2001 would be surprised by the major changes taken in the tax-exempt marketplace since then. The size of the market has nearly doubled from $2.3 trillion to $4.5 trillion, and sector diversification has exploded with the increased number of financings for senior living and care, standalone hospitals, and charter schools, for example. New public-private partnerships have emerged, fueling a growing number of senior living, student housing, affordable housing, and economic development deals. Transparency has significantly improved with the introduction of EMMA, the Electronic Municipal Market Access disclosure platform.
Digitals and Defaults
While traders still rely upon telephones for story bonds and large block sales, more than 20% of muni bonds now change hands on electronic trading platforms. The first muni exchange traded fund was launched in 2007 and there are now 172 with combined assets of $228 billion. Separately managed accounts with muni strategies have become increasingly popular with combined assets of approximately $1.5 trillion. There are also now 468 municipal bond mutual funds holding $889 billion. The market was roiled by the Chapter 9 bankruptcies of Jefferson County, Alabama in 2011 and the City of Detroit in 2013. Puerto Rico entered the record books with the largest municipal debt defaults and restructuring; 11 years later, some debt adjustment is still being contested in court. But defaults overall remain rare, under 1%, well below those in the corporate bond market.
Yields Today, Yields on 9/11
Amid a year of market volatility driven by the conflict with Iran, inflation, tariffs, central bank rate uncertainty, Treasury interventions and rising government yields, municipal bonds have done remarkably well. At this writing, the 10-year Treasury yield at 4.91% is at its highest level since July 2007, up 75 basis points from the start of the year. The 2-year yield stands at 4.52%, 105 basis points higher, and the 30-year is at 5.33%, up 49 basis points. On 9/11/01, the 2-year stood at 3.51%, the 10-year at 4.80%, and the 30-year at 5.41%. The 10-year AAA general obligation muni benchmark yield at 3.57% is 81 basis points higher on the year. The 2-year at 2.67% is up 28 basis points, and the 30-year at 4.79% has increased 55 basis points. On 9/11/01, the 2-year muni yield was 2.65%, the 10-year at 4.05%, and the 30-year at 4.97%.
Heavy 2026 Bond Issuance
Corporate bond issuance has exploded this year. Investment grade sales at $1.54 trillion are up 31% from last year, primarily due to massive capital expenditures by the big tech hyperscalers funding AI infrastructure. Treasury issuance through August reached approximately $21.8 trillion, up 11.8% from last year. The muni market is on track to set a third, consecutive year of record issuance. At this writing, Bloomberg estimates that year-to-date issuance totals $482.3 billion, with $443.8 billion coming with investment grade ratings, $3.5 billion rated below investment grade, and $34.9 billion non-rated. So far this month, $25.5 billion has come to market. This includes a $101.4 million Clifton Higher Education Finance Corporation sale for Vanguard Academy that came with a Texas PSF guarantee; the 2056 final maturity priced at 5.00% to yield 5.13%. This week, the Ohio Housing Finance Agency has a $29.4 million non-rated financing for Ashford of Tiflin, and the Clackamas County Hospital Authority plans a $124.2 million BBB-minus rated transaction for Willamette View.
Municipal bond fund flows slowed last week with net investment of $138 million, down from $1.4 billion in the last week of August in part due to the approaching Labor Day holiday, as well as the dropoff in reinvestment cash. The Investment Company Institute estimates that, so far this year, a net of $37.2 billion has been added to muni mutual funds and $39.2 billion to muni ETFs. High yield index returns a total of 1.62% year-to-date, besting AAA rated indices at (0.86%), muni investment grade returns at (0.24%), taxable munis at (0.11%), Treasuries at (0.51%), investment grade corporates at (0.33%), and mortgages at 0.24%.
9/11 is Transitioning from a Lived Memory to a Historical Event
The Pew Research Center reported this month that 93 percent of Americans who were at least 10 years old on 9/11 remember exactly where they were or what they were doing when they heard the news about the 9/11 terror attacks. Among the many whose priorities shifted dramatically, quite a few young couples decided to start or expand their families. One year after 9/11 there were 1.336 million babies born; they now approach their 14th birthdays. Of our population of 342 million, more than 100 million Americans were either born after September 11, 2001, or were too young at the time to remember it. What they know of that day, they learned from history class, through schoolwork, documentaries featured at this time of year or via recollections shared by survivors and witnesses. We have a duty to that generation and the ones to follow, as well as to the memories of those lost that day, to share the facts as well as our experiences, to remind them that terrorism and heroism are very real.
As the bells toll on Friday, we at HJ Sims join with the nation in honoring the heroic men and women who risked and sacrificed their lives so that others might survive, the brave among us who helped many others to get home that day, those in uniform serving around the world and the dedicated members of our law enforcement, public safety and intelligence communities who work 24/7 to protect us from harm and defend liberty from all who seek to deny it.