This "bug" was heavily commented on but the behavior was never changed:

Welcome to psql 8.0.0beta2, the PostgreSQL interactive terminal.

Type:  \copyright for distribution terms
       \h for help with SQL commands
       \? for help with psql commands
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alvherre=# select 123456789012345678901234567890 % 123; 
 ?column? 
----------
       -6
(1 fila)


The most relevant part of the thread is here:

http://archives.postgresql.org/pgsql-general/2004-04/msg01065.php

-- 
Alvaro Herrera (<alvherre[a]dcc.uchile.cl>)
Thou shalt check the array bounds of all strings (indeed, all arrays), for
surely where thou typest "foo" someone someday shall type
"supercalifragilisticexpialidocious" (5th Commandment for C programmers)


Fri, 3 Sep 2004 12:06:07 -0400
Alvaro Herrera <alvherre@dcc.uchile.cl>
Bug in numeric modulo operation remains