Shocks to U.S. monetary policy significantly affect sovereign credit risk, and financial intermediaries play an important role in this transmission. Using market-based measures of intermediary stress and regulatory data on dealer-country-level sovereign CDS positions, we show that a decline in risk-taking capacity by intermediaries prior to an FOMC announcement significantly amplifies the sensitivity of sovereign spreads to U.S. monetary policy shocks. To explain these findings, we develop a general equilibrium asset pricing model of the world economy which features occasionally-binding intermediary borrowing constraints that amplify movements in sovereign default risk and risk premia. Spillovers from U.S. intermediary financing conditions to foreign output are crucial to match the sign and magnitude of monetary policy effects observed in the data.