This paper presents a novel sovereign credit risk model aimed at extracting information from the term structure of credit spreads. At the heart of the model lies the fiscal limit, defined as the maximum outstanding debt that can credibly be covered by future primary budget surpluses. By predicting how sovereign credit default swaps (CDS) react to changes in fiscal limit expectations, our model allows to back out such expectations from market data. The empirical analysis pertains to four large advanced economies. The resulting fiscal limit estimates feature substantial time-variation. Moreover, we obtain sizeable estimates of sovereign credit risk premiums as the components of sovereign spreads that would not exist if agents were risk-neutral.