European sovereign debt markets have been under scrutiny since the sovereign debt crisis of 2009. In this paper, we study to what extent the extreme dynamics were driven by fundamentals or speculation. We do so by decomposing bond and CDS spreads into fundamental and non-fundamental parts using a heterogeneous agent model. We find that bond markets are driven for 80% by liquidity trading, 13% by credit news, and only 5.4% by speculation. The CDS market is for 49% driven by credit news, 45% liquidity trading, and 5.5% speculation. The relative importance of the different types of agents varies over time, though.