This paper asks whether the sensitivity of market long-term interest rates and credit ratings is

associated with cross-country differences in informal institutions, measured by social trust. We note a

number of theoretical mechanisms that could imply that similar objective problems are more likely to

be effectively dealt with in higher-trust societies. A set of panel estimates across middle and high

income countries reveal that interest rates and ratings are substantially more sensitive to inflation and

growth problems in low-trust countries. This finding sheds light on the differential market reactions to

economic problems in seemingly comparable countries.