By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) -U.S. Treasuries fell sharply on Wednesday, propelling yields to multi-month highs as Donald Trump's presidential election victory ignited bets on economic policy shifts that could boost deficits and inflation.

The Republican former President swept back to power early on Wednesday, beating Democratic candidate Vice President Kamala Harris and capping a political comeback four years after he left the White House.

The benchmark 10-year Treasury yield rose to 4.479%, its highest since July, as polls also showed Republicans winning control of the Senate and a close race for the House of Representatives.

The 10-year yield, which moves inversely to the price, was last up 15.3 bps at 4.441%, on track for its biggest one-day rise since April.

U.S. yields, however, pared gains after a better-than-expected 30-year Treasury bond auction.

Trump campaigned on a platform of tax cuts, which economists say would juice the economy, widen budget deficits and increase government borrowing. He also touted tariffs, which analysts expect to stoke inflation and reduce the Federal Reserve's scope to cut interest rates.

"The risk in the market with Trump is an undisciplined fiscal situation. At some point in 2025, the deficit will grab the narrative of the market," said James Camp, managing director of fixed income and strategic income at Eagle Asset Management in St. Petersburg, Florida.

"If you believe that the gap between rhetoric and policy could be a mile-wide ... there is still an impulse from Trump on the spending side that would be bearish for bonds. The leaning in bonds is to be cautious given the results."

The yield on the 30-year Treasury note last traded 16.5 bps higher at 4.612%, after earlier hitting 4.678%, the highest since late May. It is set for its biggest one-day rise since March 2020, underscoring concerns about future borrowing.

SOLID US 30-YEAR BOND AUCTION

Wednesday's sale of $25 billion worth of 30-year bonds lured buyers after being sharply sold off. The note was priced at 4.608%, lower than the rate forecast at the bid deadline, suggesting investors did not demand extra yield to take down the note.

There were $66 billion in bids for a 2.64 bid-to-cover ratio, up from 2.50 previously and the 2.31 from the August new issue.

Meanwhile, the MOVE index, the benchmark gauge of rate volatility, hit a more than one-year high of 136.25 on Monday, suggesting Treasury yields across most maturities will move at least 8.5 basis points per day in either direction over the next month. It was last at 130.43.