(Reuters) - Beginning on October 1, the government will dial back on the size of mortgages it guarantees in high-cost areas like San Francisco, New York and Washington. Anybody who wants a government-backed mortgage for a $1-million home after October 1 may have to come up with a $370,000 downpayment instead of $270,000, says Rob Chrisman, an independent mortgage banking consultant from San Rafael, California. The deadline will mean most to upper-middle-class buyers and sellers in costly real estate markets where $1 million buys a nice house, but not a mansion. To be sure, that part of the market is picking up. Real estate agents operating in tonier neighborhoods are reporting brisker business this spring than in recent years. Sotheby's, which specializes in luxury homes, reports sales making double-digit gains for the first quarter of this year over last year. The National Association of Realtors reported that the sale of homes over $1 million were up 5.1 percent in March over the same month last year. "We are seeing a normal recovery," said Jed Smith, managing director of quantitative research. "I'm sure somebody will accelerate their activity (because of the expected drop in government-backed loan limits), but I doubt you'll see a lot of acceleration because of that." (Reporting by Linda Stern; Editing by Richard Satran) Follow the link for full article:

Following the release of The Philly Fed index, MBS moved to their highs of the day at 102-05, but are already back down to pre-data levels at 102-03. Treasuries also rallied on the economically unfriendly data but remained inside their best levels of the day from earlier this morning.

* PHILADELPHIA FED BUSINESS CONDITIONS APRIL 18.5 VS MARCH 43.4 * PHILADELPHIA FED NEW ORDERS INDEX APRIL 18.8 VS MARCH 40.3 * PHILADELPHIA FED PRICES PAID INDEX APRIL 57.1 VS MARCH 63.8 * PHILADELPHIA FED EMPLOYMENT INDEX APRIL 12.3 VS MARCH 18.2 * PHILADELPHIA FED SIX-MONTH BUSINESS CONDITIONS APRIL 33.6 VS MARCH 63.0 * PHILADELPHIA FED SIX-MONTH CAPITAL EXPENDITURES OUTLOOK APRIL 20.0 VS MARCH 34.5

While the initial moves were positive for both Treasuries and MBS, minutes after the 830am Jobless Claims release, both have weakened. FNCL 4.5's made it as high as 102-05 but have fallen to 102-02, 2 ticks down on the day. 10yr notes rose from 3.368 to 3.393. Although this is 1.5 bps lower on the day, we'd prefer to see 3.40 hold as support heading into next week, but are wary of FOMC and auction supply creating concessionary pressures. Current MBS losses are not enough that we'd expect reprices for the worse. In that regard, yesterday's "danger level" remains the same: 102-00, with more danger the lower we go from there.

We've implemented some changes to our system in prepartion for the release of our new MBSonMND Dashboard. These changes have caused a few issues this morning including an incorrect pricing notification that some of you received around 8:30 AM. This PRICING WAS INCORRECT. We apologize for any bumps in the road this AM and ask that you please contact support@mortgagenewsdaily.com if you come across anything that needs our attention. Thank You!

SIFMA HAS RECOMMENDED A 2PM CLOSE FOR THE BOND MARKET TODAY IN OBSERVANCE OF TOMORROW'S GOOD FRIDAY HOLIDAY. All recommended market closes are recommendations only; each SIFMA member firm will decide for itself whether its fixed-income departments remain open for trading. All SIFMA recommendations are subject to change due to market conditions. All SIFMA holiday recommendations apply to the trading of U.S. dollar-denominated government securities, mortgage- and asset-backed securities, over-the-counter investment-grade and high-yield corporate bonds, municipal bonds and secondary money market trading in bankers’ acceptances, commercial paper and Yankee and Euro certificates of deposit. Previously scheduled SIFMA early close recommendations do not affect the closing time for settlements.

RTRS 08:30 - US JOBLESS CLAIMS FELL TO 403,000 APRIL 16 WEEK (CONSENSUS 392,000) FROM 416,000 PRIOR WEEK (PREVIOUS 412,000). RTRS 08:30 - US JOBLESS CLAIMS 4-WK AVG ROSE TO 399,000 APRIL 16 WEEK FROM 396,750 PRIOR WEEK (PREVIOUS 395,750) . RTRS 08:30 - US CONTINUED CLAIMS FELL TO 3.695 MLN (CON. 3.670 MLN) APRIL 9 WEEK FROM 3.702 MLN PRIOR WEEK (PREV 3.680 MLN). RTRS 08:30 - US INSURED UNEMPLOYMENT RATE UNCHANGED AT 2.9 PCT APRIL 9 WEEK (PREV 2.9 PCT)

UPDATED AT 11:35...