This paper analyses the fragmentation risk in the European Monetary Union, investigating the shock transmission mechanisms in the sovereign bond market. To achieve this goal, it builds a new methodology for modelling interactions, reconciling Factor and Global Vector Autoregressive models. This framework helps to disentangle interdependence from contagion and flight-to-quality effects, therefore assessing more precisely the degree of fragmentation. It turns out that fragmentation risk was already present and sizeable in the pre-European sovereign debt crisis period, but has been sharply mitigated after. The COVID crisis has put it back at the forefront of the scene and questions the European integration process.

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