WASHINGTON, Nov 17 (Reuters) - The U.S. Treasury said on Monday that it will allow the Federal Reserve Supplementary Financing Account balance to decline in the coming weeks as cash management bills sold to fund the program mature. The Treasury said it has opted not to refund these bills in order to preserve flexibility in its debt management policies to meet large government financing needs. The Fed supplementary financing account, created to help the Fed meet its liquidity facilities, stood at $508.956 billion on Nov. 13. compared with $558.892 billion on Nov. 12, according to Treasury data. The Treasury is ramping up its debt issuance plans to cope with what some of its bond dealers estimate as a $2.1 trillion borrowing need in the 2009 fiscal year that started Oct. 1. The cost of government financial bailout programs, and falling revenues as the U.S. economy slows to recessionary levels have prompted the Treasury to resurrect the 3-year note and plan more frequent auctions of 10-year notes and 30-year bonds in coming months. At the same time, the Fed's most recent auctions for short term funds have shown a cooling in bank demand for the Fed funds. Last week's forward auction of $150 billion in 17-day funds attracted only $12.6 billion in bids, for a bid-to-cover ratio of just 0.08 -- an indication that a loosening of credit markets may mean fewer banks need to turn to the Fed for liquidity. (Reporting by David Lawder, Editing by Walker Simon)

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