Why would this occur? Funds might be obligated to keep some percentage of assets in securities, and want Treasuries due to low risk--- even though it's a guaranteed losing proposition. Even without this constraint, if you have a billion dollars sitting around, the risk that your bank will go under has got to be worth at least a fraction of a percentage point, so keeping it in "electronic" cash is not free. And physical cash costs even more! There may also be some speculators who see the high demand and play the market even though the yield on the security is negative.
There seems like a market opportunity here (even if the arbitrage disappears)--- how could you keep money safe for a low enough cost that people can park cash with you, instead of taking a guaranteed loss on treasuries? Become a bank and double-pinky-swear not to do anything with the money?
For that matter, what sort of budget would you need to take advantage of the arbitrage opportunity here?