I review the literature concerning the determinants of yield spreads on government bonds. Due to the large attention received in the literature, I will refer to European and emerging markets. Europe has undergone signicant institutional changes over the last decade and the corresponding market has become increasingly integrated. The value of bonds issued by emerging economies has reached high levels in the 1990s with important implication for the operation of international capital markets. This survey provides an extensive overview of the most recent explanations to the observed yield spreads on sovereign bonds.