Vehicle is a '95 BMW 540iA (M60 V-8 motor) which is equipped with version M3.3 Motronic DME. Model-specific oxygen sensors were employed. Both sensors are located downstream of the cats.
Am more interested in the technical aspects of this problem rather than an actual model specific answer.... was unware that lambda voltages could dip into negative values. In this particular case, however, sensor 1's voltages remain negative at all times.
From the link that Arthur has kindly posted, a negative value is indicative of a defective sensor.