Ten-year yields in Germany - the euro zone's benchmark issuer - have been trading below zero percent in the secondary market for the past three weeks and hit a record low last week at around minus 0.20 percent.
The negative yield at Wednesday's auction means investors buying the 10-year Bund and holding it to maturity would receive back less than they paid. That's a trade-off many investors are willing to make to hold safe-haven German paper against the backdrop of global uncertainty, unprecedented monetary stimulus from the European Central Bank and a tepid inflation outlook.
"This auction is a symptom of what we're seeing globally," said Orlando Green, European fixed income strategist at Credit Agricole. "We are in a positive market environment for bonds right now and investors remain relatively long German Bunds."
The coupon on the new German bond was zero percent for the first time, indicating investors are willing to miss out on annual interest payments to hold German bonds, considered one of the safest assets in the world.
A collapse in developed market borrowing costs has swept more than $11 trillion worth of bonds globally into negative territory, a move that has gathered pace since last month's decision by British voters to back leaving the European Union.
"It would be the icing on the cake for investors who have come to accept that you don't get money back on your investment," said David Schnautz, an interest rate strategist at Commerzbank, referring to a negative yield at the German auction.