We document significant heterogeneity in the degree and dynamics of sovereign bond market integration across 21 developed and 16 emerging countries at the market level and for five maturity segments. While political risk, credit quality, and inflation risk play an important role for integrating bond markets, the effect of illiquidity becomes large in crisis periods. This relationship is not subsumed by currency risk. Integration is negatively related to sovereign funding cost with a one percent increase in integration corresponding to an average decrease in the cost of funding of about 3% of 5-year CDS spreads across all developed bond markets.