Funds were the biggest buyers of the first negative-yielding euro bonds sold by a non-financial company, highlighting how central bank stimulus is distorting markets.

Deutsche Bahn AG allocated 57 percent of the 350-million euro ($388 million) bond sale to funds, while banks bought 23 percent, according to a person familiar with the matter who asked not to be identified because they aren’t authorized to discuss the offering. Investors in Germany and Austria bought most of the bonds.

Investors in the state-owned German rail operator will effectively pay to lend to the company after its bonds were sold to yield minus 0.006 percent on Tuesday. Yields on more than $10 trillion of sovereign and investment-grade corporate bonds have been driven to zero or below as central bank efforts to boost their economies inflate asset prices. 

“It must feel awkward to be exposed to a credit risk and simultaneously lock in a guaranteed loss,” said Hyung-Ja de Zeeuw, an Amsterdam-based senior credit strategist at ABN Amro Bank NV.  “It’s the world upside down: you issue bonds and you get money for free. It’s a result of unconventional policy.”

The average yield investors demand to hold investment-grade debt in euros has fallen to a record 0.8 percent, according to Bank of America Merrill Lynch indexes.

Buyers are prepared to accept negative-yielding Deutsche Bahn bonds because they view them almost as secure as German sovereign debt. Germany auctioned 10-year bonds with a negative yield for the first time on Wednesday, with bund rates at minus 0.056 percent.

“Investors probably consider this as effectively a higher-yielding, albeit negative, German government bond,” said Duncan Warwick-Champion, the London-based co-head of global credit research at ECM Asset Management, an investment team within Wells Fargo Asset Management, which oversees more than $480 billion.  “The supply of bonds relative to the level of demand from investors is quite limited.”