UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5078
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MFS GOVERNMENT MARKETS INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: November 30
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Date of reporting period: February 28, 2007
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ITEM 1. SCHEDULE OF INVESTMENTS.
MFS(R) GOVERNMENT MARKETS INCOME TRUST
2/28/07
Quarterly portfolio holdings
[graphic omitted]
M F S(R)
INVESTMENT MANAGEMENT
MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 02/28/2007
ISSUER SHARES/PAR VALUE ($)
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BONDS - 93.5%
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U.S. BONDS - 83.9%
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AGENCY - OTHER - 7.9%
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Financing Corp., 10.7%, 2017 $ 4,095,000 $ 6,019,916
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Financing Corp., 9.4%, 2018 3,085,000 4,230,494
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Financing Corp., 9.8%, 2018 4,350,000 6,127,527
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Financing Corp., 10.35%, 2018 6,820,000 9,971,938
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Financing Corp., STRIPS, 0%, 2017 5,000,000 2,948,315
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$ 29,298,190
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ASSET BACKED & SECURITIZED - 0.5%
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Prudential Securities Secured Financing Corp., FRN, 7.4541%, 2013 (z) $ 1,819,000 $ 1,941,178
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MORTGAGE BACKED - 47.8%
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Fannie Mae, 7.056%, 2007 $ 266,384 $ 266,328
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Fannie Mae, 4.79%, 2012 3,522,804 3,442,420
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Fannie Mae, 4.543%, 2013 850,805 832,499
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Fannie Mae, 4.8%, 2013 409,035 405,326
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Fannie Mae, 4.845%, 2013 1,005,578 994,321
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Fannie Mae, 5%, 2013 - 2027 10,821,487 10,730,890
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Fannie Mae, 5.06%, 2013 402,450 401,176
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Fannie Mae, 5.369%, 2013 1,039,395 1,050,343
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Fannie Mae, 4.518%, 2014 1,151,637 1,121,669
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Fannie Mae, 4.6%, 2014 483,707 473,505
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Fannie Mae, 4.666%, 2014 2,931,942 2,879,100
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Fannie Mae, 4.77%, 2014 493,406 485,005
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Fannie Mae, 4.847%, 2014 3,282,910 3,254,870
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Fannie Mae, 4.871%, 2014 1,807,257 1,795,603
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Fannie Mae, 5.1%, 2014 527,041 529,985
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Fannie Mae, 4.56%, 2015 624,425 608,172
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Fannie Mae, 4.62%, 2015 694,658 679,316
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Fannie Mae, 4.665%, 2015 421,179 412,817
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Fannie Mae, 4.69%, 2015 344,255 337,984
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Fannie Mae, 4.7%, 2015 483,164 474,536
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Fannie Mae, 4.74%, 2015 390,000 382,115
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Fannie Mae, 4.78%, 2015 548,283 540,784
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Fannie Mae, 4.815%, 2015 543,000 534,250
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Fannie Mae, 4.82%, 2015 1,465,218 1,444,933
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Fannie Mae, 4.85%, 2015 344,021 340,943
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Fannie Mae, 4.87%, 2015 364,670 361,774
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Fannie Mae, 4.89%, 2015 408,571 405,872
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Fannie Mae, 4.925%, 2015 1,352,583 1,346,305
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Fannie Mae, 5.471%, 2015 948,726 977,189
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Fannie Mae, 5.09%, 2016 500,000 499,922
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Fannie Mae, 5.423%, 2016 803,795 825,859
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Fannie Mae, 5.845%, 2016 517,175 532,916
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Fannie Mae, 6.5%, 2016 - 2036 8,763,016 8,988,678
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Fannie Mae, 5.05%, 2017 525,300 523,412
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Fannie Mae, 5.5%, 2017 - 2035 64,698,731 64,365,226
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Fannie Mae, 6%, 2017 - 2034 13,300,535 13,477,834
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Fannie Mae, 4.5%, 2019 14,600,283 14,168,418
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Fannie Mae, 4.88%, 2020 355,608 352,198
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Freddie Mac, 4.5%, 2013 - 2021 2,368,319 2,350,461
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Freddie Mac, 4.375%, 2015 1,924,477 1,889,177
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Freddie Mac, 5%, 2016 - 2025 13,133,467 13,093,921
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Freddie Mac, 6%, 2021 - 2035 1,785,057 1,805,273
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Freddie Mac, 5.5%, 2024 - 2035 11,205,170 11,149,422
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Ginnie Mae, 5.5%, 2033 6,137,350 6,136,804
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$177,669,551
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U.S. GOVERNMENT AGENCIES - 14.1%
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Aid-Egypt, 4.45%, 2015 1,755,000 $ 1,704,035
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Aid-Israel, 0%, 2021 2,378,000 1,133,424
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Aid-Israel, 0%, 2024 2,726,000 1,144,795
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Aid-Israel, 0%, 2024 2,726,000 1,115,929
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Fannie Mae, 4.625%, 2013 736,000 726,830
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Farmer Mac, 5.5%, 2011 (n) 3,010,000 3,079,227
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Federal Home Loan Bank, 4.5%, 2007 2,250,000 2,246,483
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Federal Home Loan Bank, 4.625%, 2008 9,090,000 9,055,067
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Freddie Mac, 4.2%, 2007 4,358,000 4,327,407
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Overseas Private Investment Corp., 0%, 2007 1,056,227 1,128,473
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Small Business Administration, 8.875%, 2011 148,543 154,397
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Small Business Administration, 6.34%, 2021 1,079,623 1,121,395
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Small Business Administration, 6.35%, 2021 1,244,233 1,292,196
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Small Business Administration, 6.44%, 2021 1,086,442 1,130,749
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Small Business Administration, 6.625%, 2021 1,184,926 1,243,106
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Small Business Administration, 4.98%, 2023 840,352 837,122
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Small Business Administration, 4.34%, 2024 1,212,944 1,166,285
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Small Business Administration, 4.72%, 2024 2,089,694 2,051,133
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Small Business Administration, 4.77%, 2024 2,102,339 2,069,757
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Small Business Administration, 4.86%, 2024 - 2025 2,552,996 2,520,318
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Small Business Administration, 4.87%, 2024 1,396,376 1,379,071
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Small Business Administration, 5.52%, 2024 1,283,162 1,306,717
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Small Business Administration, 4.76%, 2025 2,126,518 2,082,178
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Small Business Administration, 5.11%, 2025 1,283,900 1,284,368
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U.S. Department of Housing & Urban Development, 6.36%, 2016 1,580,000 1,643,788
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U.S. Department of Housing & Urban Development, 6.59%, 2016 5,612,000 5,706,124
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$ 52,650,374
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U.S. TREASURY OBLIGATIONS - 13.6%
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U.S. Treasury Bonds, 8.75%, 2017 $ 6,100,000 $ 8,134,448
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U.S. Treasury Bonds, 4.5%, 2036 6,301,000 6,110,987
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U.S. Treasury Notes, 6.5%, 2010 (f) 12,594,000 13,263,547
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U.S. Treasury Bonds, 10.375%, 2012 8,400,000 8,704,172
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U.S. Treasury Bonds, 12%, 2013 3,036,000 3,345,529
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U.S. Treasury Notes, 4.25%, 2015 4,400,000 4,307,530
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U.S. Treasury Notes, TIPS, 3.875%, 2009 2,702,002 2,794,038
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U.S. Treasury Notes, TIPS, 2.375%, 2017 3,711,300 3,774,796
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$ 50,435,047
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Total U.S. Bonds $311,994,340
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FOREIGN BONDS - 9.6%
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AUSTRALIA - 0.3%
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Commonwealth of Australia, 6.5%, 2013 AUD 1,174,000 $ 958,354
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Commonwealth of Australia, 6%, 2017 AUD 235,000 189,451
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$ 1,147,805
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AUSTRIA - 0.5%
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Republic of Austria, 4.65%, 2018 EUR 1,201,000 $ 1,675,202
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BRAZIL - 0.0%
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Federative Republic of Brazil, 8%, 2018 $ 102,000 $ 114,189
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CANADA - 0.3%
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Canada Housing Trust, 4.6%, 2011 CAD 179,000 $ 156,401
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Government of Canada, 5.5%, 2009 CAD 712,000 628,970
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Government of Canada, 4.5%, 2015 CAD 143,000 126,355
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Government of Canada, 8%, 2023 CAD 102,000 126,827
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Government of Canada, 5.75%, 2033 CAD 209,000 225,893
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$ 1,264,446
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CHILE - 0.4%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 314,000 $ 336,861
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Republic of Chile, FRN, 5.76%, 2008 1,057,000 1,059,643
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$ 1,396,504
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DENMARK - 0.1%
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Kingdom of Denmark, 4%, 2015 DKK 1,771,000 $ 316,041
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EGYPT - 0.0%
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Petroleum Export/Cayman, 5.265%, 2011 (n) $ 88,935 $ 87,055
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FRANCE - 0.8%
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Republic of France, 4.75%, 2012 EUR 349,000 $ 480,672
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Republic of France, 5%, 2016 EUR 585,000 835,122
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Republic of France, 6%, 2025 EUR 235,000 386,513
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Republic of France, 4.75%, 2035 EUR 962,000 1,400,319
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$ 3,102,626
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GERMANY - 1.3%
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Federal Republic of Germany, 5.25%, 2010 EUR 913,000 $ 1,257,978
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Federal Republic of Germany, 3.75%, 2015 EUR 459,000 599,276
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Federal Republic of Germany, 6.25%, 2030 EUR 707,000 1,225,884
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KfW Bankengruppe, 1.35%, 2014 JPY 187,000,000 1,575,111
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$ 4,658,249
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IRELAND - 0.6%
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Republic of Ireland, 3.25%, 2009 EUR 721,000 $ 941,366
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Republic of Ireland, 4.6%, 2016 EUR 940,000 1,302,729
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$ 2,244,095
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JAPAN - 1.8%
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Development Bank of Japan, 1.75%, 2010 JPY 84,000,000 $ 727,534
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Development Bank of Japan, 1.4%, 2012 JPY 126,000,000 1,070,906
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Development Bank of Japan, 1.05%, 2023 JPY 196,000,000 1,427,610
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Development Bank of Japan, 2.3%, 2026 JPY 30,000,000 260,405
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Japan Finance Corp. for Municipal Enterprises, 1.55%, 2012 JPY 126,000,000 1,080,616
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Japan Finance Corp. for Municipal Enterprises, 2%, 2016 JPY 230,000,000 2,004,751
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$ 6,571,822
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MALAYSIA - 0.1%
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Petronas Capital Ltd., 7.875%, 2022 $ 433,000 $ 541,001
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MEXICO - 0.7%
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Pemex Project Funding Master Trust, 9.375%, 2008 $ 1,072,000 $ 1,137,392
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United Mexican States, 8.3%, 2031 128,000 164,288
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United Mexican States, 6.75%, 2034 1,164,000 1,270,506
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$ 2,572,186
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NETHERLANDS - 0.9%
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Kingdom of Netherlands, 3.75%, 2009 EUR 1,693,000 $ 2,231,429
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Kingdom of Netherlands, 3.75%, 2014 EUR 487,000 636,362
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Kingdom of Netherlands, 4%, 2016 EUR 359,000 475,393
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$ 3,343,184
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PANAMA - 0.2%
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Republic of Panama, 9.375%, 2029 $ 677,000 $ 903,795
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RUSSIA - 0.4%
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Russian Federation, 3%, 2008 $ 1,474,000 $ 1,428,011
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SOUTH AFRICA - 0.3%
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Republic of South Africa, 9.125%, 2009 $ 855,000 $ 921,690
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SPAIN - 0.5%
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Kingdom of Spain, 5.35%, 2011 EUR 1,250,000 $ 1,752,579
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UNITED KINGDOM - 0.4%
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United Kingdom Treasury, 8%, 2015 GBP 133,000 $ 319,022
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United Kingdom Treasury, 8%, 2021 GBP 146,000 384,698
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United Kingdom Treasury, 4.25%, 2036 GBP 367,000 720,280
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$ 1,424,000
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Total Foreign Bonds $ 35,464,480
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TOTAL BONDS $347,458,820
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REPURCHASE AGREEMENTS - 5.9%
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Merrill Lynch, 5.32%, dated 2/28/07, due 3/01/07, total to be received $22,071,261
(secured by various U.S. Treasury and Federal Agency obligations and Mortgage
Backed securities in a jointly traded account) $ 22,068,000 $ 22,068,000
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TOTAL INVESTMENTS(k) $369,526,820
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OTHER ASSETS, LESS LIABILITIES - 0.6% 2,277,584
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NET ASSETS - 100.0% $371,804,404
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(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(k) As of February 28, 2007, the trust held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $345,307,013 and 93.45% of market value. An
independent pricing service provided an evaluated bid for 93.30% of the market value.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be sold in the ordinary course of business in transactions exempt from registration, normally to
qualified institutional buyers. At period end, the aggregate value of these securities was
$3,166,282, representing 0.85% of net assets.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal
restrictions on resale. These securities generally may be resold in transactions exempt from
registration or to the public if the securities are subsequently registered. Disposal of these
securities may involve time-consuming negotiations and prompt sale at an acceptable price may be
difficult. The trust holds the following restricted securities:
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
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Prudential Securities Secured
Financing Corp., FRN, 7.4541%,
2013 12/6/04 $2,019,445 $1,941,178 0.5%
The following abbreviations are used in this report and are defined:
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
STRIPS Separate Trading of Registered Interest and Principal of Securities
TIPS Treasury Inflation Protected Security
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S. dollars
unless otherwise indicated. A list of abbreviations is shown below:
AUD Australian Dollar
CAD Canadian Dollar
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Krone
NZD New Zealand Dollar
See attached schedules. For more information see notes to financial statements as disclosed in the most
recent semiannual or annual report.
MFS GOVERNMENT MARKETS INCOME TRUST
SUPPLEMENTAL SCHEDULES (UNAUDITED) 02/28/2007
(1) PORTFOLIO SECURITIES
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate Cost $376,432,665
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Gross unrealized appreciation $ 2,471,214
Gross unrealized depreciation (9,377,059)
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Net unrealized appreciation (depreciation) $(6,905,845)
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The aggregate cost above includes prior fiscal year end tax adjustments.
(2) FINANCIAL INSTRUMENTS
DERIVATIVES
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
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SALES
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AUD 2,678,047 4/05/07 $ 2,069,685 $ 2,107,904 $ (38,219)
CAD 1,783,001 3/26/07 - 4/02/07 1,515,401 1,525,733 (10,332)
DKK 2,004,314 4/16/07 349,354 356,502 (7,148)
EUR 13,618,417 3/26/07 17,708,334 18,037,952 (329,618)
GBP 1,503,747 4/23/07 2,938,141 2,952,338 (14,197)
JPY 581,447,721 3/16/07 4,842,611 4,923,789 (81,178)
NOK 5,771,837 3/05/07 1,886,662 941,459 275
NZD 1,269,405 4/16/07 890,881 887,946 2,935
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$32,201,069 $31,733,623 $(477,482)
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PURCHASES
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AUD 1,256,426 4/05/07 $ 994,951 $ 988,939 $ (6,012)
CAD 505,796 4/02/07 427,930 432,835 4,905
EUR 1,485,351 3/26/07 1,943,086 1,967,386 24,300
GBP 735,282 4/23/07 1,442,256 1,443,595 1,339
NOK 11,543,674 3/05/07 - 4/17/07 1,886,662 1,884,292 (2,370)
NZD 1,269,405 4/16/07 867,004 887,946 20,942
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$ 7,561,889 $ 7,604,993 $ 43,104
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At February 28, 2007 forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $37,203 with Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT 02/28/07
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
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U.S. Treasury Bond (Short) 59 $6,667,000 Mar-07 $ 26,528
U.S. Treasury Note 5 yr (Short) 54 5,721,469 Jun-07 (25,501)
U.S. Treasury Note 10 yr (Short) 33 3,583,594 Jun-07 9,681
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$ 10,708
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At February 28, 2007, the trust had sufficient cash and/or securities to cover any commitments under
these derivative contracts.
ITEM 2. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this Form N-Q, the registrant's principal financial
officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 3. EXHIBITS.
File as exhibits as part of this Form a separate certification for each
principal executive officer and principal financial officer of the registrant
as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: MFS GOVERNMENT MARKETS INCOME TRUST
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By (Signature and Title)* MARIA F. DWYER
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Maria F. Dwyer, President
Date: April 16, 2007
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* MARIA F. DWYER
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Maria F. Dwyer, President (Principal Executive
Officer)
Date: April 16, 2007
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By (Signature and Title)* TRACY ATKINSON
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Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: April 16, 2007
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* Print name and title of each signing officer under his or her signature.