> Institutions don't have that luxury - the government doesn't insure large amounts of cash. If they keep it in a bank and the bank goes under, they lose their money. So they keep their money in national governments, which are far safer than banks.

Due to the low interest rates German insurance companies are already considering to store cash in their own vaults instead of buying bonds: https://translate.google.com/translate?hl=&sl=de&tl=en&u=htt...

Slightly negative interest rates work because physically storing cash is going to be more expensive than buying bonds (especially if you factor in costs for security, insurance, etc.). But if interest rates decreases further it's soon going to be cheaper to store cash, which is going to create a lower bound for the interest rate (assuming the government doesn't prohibit storing large amounts of cash).