Contagion in Eurozone sovereign bond markets? The good, the bad and the ugly

•We test for contagion between Eurozone bond markets during the sovereign debt crisis.•We identify two distinct phases of the crisis.•Contagion plays a limited role in propagating shocks.•Contagion is more important during the more intense phase of the crisis.•In the majority of cases, market comovements are due to interdependencies.

We test for contagion between Eurozone bond markets during the sovereign debt crisis. Using a three-regime Markov-switching VAR, we identify two distinct crisis phases (the bad and the ugly) with differing patterns of shock transmission. Evidence of contagion is scant.