U.S. Treasury sells $39 bln of 3-year notes

NEW YORK Oct 6 (Reuters) - The U.S. Treasury said it sold $39 billion worth of three-year debt on Tuesday, in what dealers saw as a fair but unspectacular auction that comes ahead of long-dated bond offerings later in the week.

Overall demand at the auction was decent based on the bid-to-cover ratio of 2.76, which was above the average of 2.62 times the amount on offer in the last 11 sales.

Foreign and institutional investors showed fair demand, based on the indirect bidder category that took 48.8 percent of the auction, versus the average of 43.15 percent over the last year.

However, it was below the average of almost 54 percent since June, when changes in calculating this category boosted figures for indirect bidding.

Yields at the auction were slightly above expectations, based on trade in the when-issued market just before the sale, but not dramatically so. Known as a "tail" this is generally seen as a weak sign for an auction.

"Nothing major, just a slightly worse-than-average auction," said Aaron Kohli, interest rate strategist at RBS Securities in Stamford, Connecticut.

"It's almost like a nonevent."

The sale was the second of this week's total of $78 billion worth of debt auctions that will also bring 10-year notes to market on Wednesday and 30-year bonds on Thursday.

Investors have kept a close eye on U.S. debt auctions this year in light of the government's burgeoning budget deficit. During a brief period on May some questioned the longevity of the United States' prized AAA rating. (Reporting by Burton Frierson; Editing by James Dalgleish)