The biggest deal of the week in the tax-exempt market was postponed Thursday morning after one trader called the session a "massacre."

Morgan Stanley was expected to price $763.7 million of California Health Facilities Financing Authority revenue bonds for St. Joseph Health System in a mix of new money and refunding. The deal was postponed due to market conditions until next week. The bonds are rated A1 by Moody's Investors Service and AA-minus by Standard & Poor's and Fitch Ratings.

The muni market selloff continued Thursday morning, following Treasuries, on Federal Reserve Board Chairman Ben Bernanke's comments Wednesday. In a press conference, Bernanke said the Fed could start tapering its $85 billion-a-month bond purchases by the end of 2013.

"There are huge bid lists out there from the big funds," a New York trader said. Another trader added the market could be weaker by 20 basis points by closing Thursday.

In the rest of the primary market, Jefferies & Co. is expected to price $367 million of Dallas-Fort Worth International Airport joint revenue improvement bonds, rated A2 by Moody's, A-plus by Standard & Poor's and A by Fitch.

RBC Capital Markets is expected to price for institutions $332.7 million of New York's Metropolitan Transportation Authority revenue bonds, rated A2 by Moody's and A by Standard & Poor's and Fitch.

In retail pricing Wednesday, yields ranged from 0.39% with a 4% coupon in 2014 to 4.41% with a 5.25% coupon in 2043. Bonds maturing in 2013 were offered via sealed bid. The bonds are callable at par in 2023 except those maturing in 2027 and 2033 which are callable at par in 2018.

In the competitive market, Anne Arundel County, Md., is expected to auction $154.1 million of general obligation bonds, rated Aa1 by Moody's and AAA by Standard & Poor's.

Wednesday, yields on the Municipal Market Data scale ended as much as five basis points higher. The 10-year yield increased four basis point to 2.28% and the 30-year yield rose five basis points to 3.58%. The two-year yield rose one basis point to 0.32%.

Yields on the Municipal Market Advisors 5% scale closed as much as six basis points higher. The 10-year and 30-year yields rose five basis points each to 2.39% and 3.69%, respectively. The two-year was steady at 0.39% for the second session.

Treasuries continued to weaken Thursday morning after a big selloff Wednesday. The benchmark 10-year yield rose seven basis points Thursday morning to 2.40% and the 30-year yield increased six basis points to 3.47%. The two-year yield rose two basis points to 0.33%.

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