Municipal bond prices slid again on Wednesday, extending a sell-off that had been ignited on Tuesday by steep losses in Treasuries and anxieties about the possible end of a popular bond program.

Prices of AAA-rated tax-free issues were off enough to increase yields by as much as 12 to 14 basis points, according to Municipal Market Data. Price declines steepened through the trading session and were worst in long maturities.

Yields, which move in the opposite direction from prices, climbed on top-quality 30-year munis by 14 basis points to 4.62 percent. For 10-year bonds, yields rose 13 basis points to 3 percent, according to MMD.

Yields are 19 basis points higher on 10-year bonds since Monday and more than a quarter of a percentage point higher on 30-year bonds.

Treasuries tumbled for a second straight day, with keenly watched yields going to six-month highs, as a deal to keep in place Bush-era federal income tax rates fed worries over the consequences of America's chronic budget deficits.

We're seeing a lot of selling in fixed income, a Chicago trader said.

Investors in the $2.8 trillion tax-free market are also rattled by uncertainties over the Build America Bonds program, which faces extinction on December 31 unless Congress intervenes.

An extension of BABs did not make it into the tax and stimulus deal announced Monday, and Republicans seem to oppose continuing the BABs program under which more than $164 billion of the taxable debt has been sold since early 2009. The disappearance of BABs would increase tax-free deal flows and swell a glut of new bonds hurting muni prices, according to investment managers.

On Wednesday, a high-profile BABs deal, and the largest single primary offering of the week, sold easily.

Underwriters led by Goldman, Sachs & Co priced a $1.85 billion offering of federally taxable turnpike revenue bonds from the New Jersey Turnpike Authority sold as Build America Bonds with a yield of 7.102 percent on a single 2041 maturity priced at par, according to a pricing schedule.

That yield was 262.50 basis points more than a comparable Treasury bond's yield. For details on the deal, which had earlier this week had been expected to total $1.

We're very pleased with the investors' reception and the resulting credit spread, turnpike spokesman Tom Feeney said, adding that deal managers were authorized to sell up to $2 billion of bonds, and based on favorable pricing and market acceptance, we decided to up it to $1.85 billion.

The 35 percent federal rebate on the BABs' interest costs dropped the net interest rate down to 4.62 percent, Feeney said.

Wednesday's biggest competitive offerings -- $173.5 million of tax-exempt bonds and $350 million of BABs -- for the Public Utilities Commission of the City and County of San Francisco were delayed to next week after the muni market turned turbulent on Tuesday, said Marc Hughes, the commission's debt manager.

We'll give the market a week to calm down, Hughes said.

(Reporting by Michael Connor; Additional reporting by Karen Pierog in Chicago and Joan Gralla in New York, Editing by Chizu Nomiyama)

Fixed income