(Adds final details, issuance plans)
By Yoruk Bahceli
May 24 (Reuters) - Austria became the latest government to enter the green bond market with a 4 billion euro ($4.3 billion) debt sale on Tuesday.
The bond, due to mature on May 23, 2049, priced for a yield of 1.876%, and Austria's Treasury retained 250 million euros of the issuance, it said.
The bond attracted 25 billion euros of investor demand, a memo from one of the lead managers seen by Reuters showed.
European governments have shown strong interest in issuing green bonds, which fund environmentally friendly projects, as investor demand has surged in recent years.
The bond priced with a "greenium" - the slightly lower yield green bonds offer versus conventional debt due to high demand - of 2.5 basis points, said Markus Stix, managing director at Austria's Treasury.
"Due to this greenium, the achieved yield was even below the (Austrian bond) maturing in October 2040, despite today’s maturity being nine years longer," he added.
In addition to longer-term green bonds, which will fund most of the country's green funding needs, Austria is also the first government to include short-term debt instruments like treasury bills and commercial paper in its green debt programme, the treasury said in a presentation ahead of the issuance.
That should attract short-term oriented investors like central banks, money market funds and bank treasuries, it said.
Following Tuesday's issuance, Austria plans to raise another 1 billion euros this year from issuing short-term green debt, Austrian Treasury official Christian Schreckeis said.
Austria has identified just over 5 billion euros of expenditure to fund through its green bond programme for 2021 and 2022 each, the presentation showed, nearly three quarters of it in clean transportation.
Green bond issuance has slowed this year, but activity is picking up, with France hiring banks on Tuesday to sell a green, inflation-linked bond.
Countries like Germany, the Netherlands and Britain are also planning to top up their existing green bonds.
Greece is also expected to launch its first issue in the second half of this year.
($1 = 0.9338 euros) (Reporting by Yoruk Bahceli; Editing by Jason Neely, Mark Potter and Jan Harvey)