I actually stopped by Oaken's storefront opening a couple weeks ago here in Toronto. I asked the guy there how their short term cashable GICs (extremely similar to a bond) were able to beat government bond rates by so much. He said they invest in "high risk" mortgages essentially, according to him still pretty safe, and since they are CDIC insured there's no risk to me. For balances under 100k.
I think their ability to offer those rates to retail clients is maybe because of one or both of the following reasons:
1. CDIC insurance is a bit too cheap. I mean, it's government backed, so shouldn't it yield similarly to government backed bonds? Seems like somebody's giving something away there, and I guess we should take advantage.
2. Investors are pricing in the fact that in case of a default, yes you get your money back from CDIC, but that process may take some amount of time or effort.
I think I'm going to keep holding VSC as my bond position. It's a tough call though.