With quarter-end funding needs supposedly squared away thanks to last week's three 2-week term-repo operations, moments ago the NY Fed announced that in the final overnight repo operation of the quarter, dealers submitted $63.5BN in collateral ($49.75BN in TSYs, $13.75BN in MBS)...

... in what was the third consecutive undersubscribed overnight repo operation, yet which saw substantially more participation than Friday's $22.7BN.

Yet those going off by the detail in today's repo operation may have a slightly more rosy take on the funding situation because according to ICAP, the overnight general collateral repo rate surged almost 1%, from 1.85% on Friday to as high as 2.8% on Monday, as quarter-end funding dynamics added to pressure on borrowing costs amid an already tense environment for money markets.

The rate on G/C overnight repo opened at 2.70%/2.50% according to Bloomberg, and at 2.80% according to Reuters, on the final day of September, which while that’s below the heady levels reached close to two weeks ago, is well above where repo ended last week (around 1.85%) and also above the 1.75%-to-2% target range that the U.S. central bank currently has for the fed funds rate.

What is most notable is that despite a barrage of overnight and term repo operations, repo rates remain elevated, with the overnight approaching 3.0%, while the term repo was last around 2.6% according to Curvature Securities' Scott Skyrm. To be sure, this overnight GC repo is well below the 10% it jumped to on Sept. 17, however it does take into account the Fed's deployment of a series of overnight and term repo operations to help keep the fed funds rate within its target range.

The Fed will continue conducting overnight repo operations through at least Oct. 10, with many traders expecting funding needs to ease to end into the new quarter.

As famously observed on Dec 31, 2018, overnight rates tends to move sharply higher at the end of the quarter as dealers "window-dress" their balance sheets and curtail activity in the financing markets. Adding to the upward pressure is an influx of additional collateral, with settlements on Monday of more than $100 billion in new Treasury coupon-bearing securities, according to Bloomberg.