In particular, the PEPP effectively countered risks of fragmentation in European financial markets, which would have prevented the smooth transmission of our monetary policy measures to the entire euro area. Risk premia in European government bond markets declined markedly and have reverted approximately to their pre-crisis levels (Figure 12).
This had a direct impact on the funding costs for households and enterprises in the euro area, thereby cushioning the economic impact of the crisis. Figure 12 10-year yield spreads of selected government bonds over German equivalents. Basis points  Source: Bloomberg. Latest observation: 16 September 2020. However, risk premia on government bonds did not decrease solely because of the monetary policy response.