Wide and volatile interest rate spreads in the 2007-2009 financial crisis could represent concerns over asset liquidity or issuer solvency. To precisely identify the contribution of these two effects on sovereign bond and interbank spreads, I propose a model-free measure of euro-area market liquidity that captures all liquidity information impounded in bond yields. I find that credit and liquidity are independently important in risk spreads; the role of liquidity dominates in the interbank market, while its relative importance in sovereign bond spreads varies substantially by country. I exploit variation in sovereign bond returns over countries, maturities and time to directly test liquidity risk pricing; the possibility that liquidity could be negatively correlated with marginal utility. I find that liquidity risk premia are large and significant, evidencing the importance of a liquidity channel missed by measures that capture only instantaneous liquidity.