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: August 31, 2006
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ITEM 1. SCHEDULE OF INVESTMENTS.
MFS(R) Government Markets Income Trust
8/31/06
Quarterly portfolio holdings
[graphic omitted]
M F S(R)
INVESTMENT MANAGEMENT
MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 08/31/2006
ISSUER SHARES/PAR VALUE ($)
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BONDS - 97.3%
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U.S. BONDS - 86.6%
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AGENCY - OTHER - 7.9%
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Financing Corp., 10.7%, 2017 $ 4,095,000 $ 6,018,373
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Financing Corp., 9.4%, 2018 3,085,000 4,216,047
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Financing Corp., 9.8%, 2018 4,350,000 6,105,042
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Financing Corp., 10.35%, 2018 6,820,000 9,951,553
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Financing Corp., STRIPS, 0%, 2017 5,000,000 2,822,385
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$ 29,113,400
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ASSET BACKED & SECURITIZED - 0.5%
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Prudential Securities Secured Financing Corp., FRN, 7.4499%, 2013 (z) $ 1,819,000 $ 1,923,107
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MORTGAGE BACKED - 48.9%
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Fannie Mae, 7.007%, 2007 $ 348,623 $ 350,422
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Fannie Mae, 4.79%, 2012 3,522,804 3,416,892
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Fannie Mae, 4.543%, 2013 858,133 825,141
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Fannie Mae, 4.65%, 2013 959,818 924,672
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Fannie Mae, 4.8%, 2013 482,439 470,994
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Fannie Mae, 4.845%, 2013 1,014,104 989,061
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Fannie Mae, 5%, 2013 - 2027 11,865,930 11,681,602
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Fannie Mae, 5.06%, 2013 405,892 400,414
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Fannie Mae, 5.37%, 2013 746,966 748,863
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Fannie Mae, 4.45%, 2014 1,218,330 1,162,115
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Fannie Mae, 4.519%, 2014 1,161,434 1,109,362
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Fannie Mae, 4.6%, 2014 487,339 468,660
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Fannie Mae, 4.667%, 2014 2,994,274 2,885,313
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Fannie Mae, 4.77%, 2014 497,373 481,284
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Fannie Mae, 4.847%, 2014 3,404,142 3,312,277
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Fannie Mae, 4.871%, 2014 1,820,579 1,778,162
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Fannie Mae, 5.1%, 2014 530,340 522,508
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Fannie Mae, 4.56%, 2015 628,970 600,735
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Fannie Mae, 4.62%, 2015 699,716 671,337
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Fannie Mae, 4.665%, 2015 424,178 407,854
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Fannie Mae, 4.69%, 2015 346,713 334,002
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Fannie Mae, 4.7%, 2015 486,579 468,861
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Fannie Mae, 4.74%, 2015 390,000 375,762
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Fannie Mae, 4.815%, 2015 543,000 525,358
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Fannie Mae, 4.82%, 2015 1,469,660 1,424,449
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Fannie Mae, 4.85%, 2015 346,323 336,946
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Fannie Mae, 4.87%, 2015 367,181 357,495
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Fannie Mae, 4.89%, 2015 480,975 469,072
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Fannie Mae, 4.925%, 2015 1,362,593 1,329,640
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Fannie Mae, 5.48%, 2015 954,928 966,923
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Fannie Mae, 5.423%, 2016 808,711 814,638
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Fannie Mae, 6.5%, 2016 - 2036 9,654,599 9,828,359
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Fannie Mae, 5.5%, 2017 - 2035 66,222,866 65,248,925
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Fannie Mae, 6%, 2017 - 2034 12,570,578 12,649,930
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Fannie Mae, 4.5%, 2019 15,336,326 14,752,950
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Fannie Mae, 4.88%, 2020 364,918 358,568
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Freddie Mac, 4.5%, 2013 - 2015 2,495,192 2,467,792
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Freddie Mac, 4.375%, 2015 2,153,840 2,092,993
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Freddie Mac, 5%, 2016 - 2025 13,226,326 13,134,706
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Freddie Mac, 6%, 2021 - 2035 1,942,899 1,950,446
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Freddie Mac, 5.5%, 2025 - 2035 11,197,199 11,026,675
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Ginnie Mae, 5.5%, 2033 6,587,585 6,531,966
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$180,654,124
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U.S. GOVERNMENT AGENCIES - 14.6%
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Aid-Egypt, 4.45%, 2015 $ 1,755,000 $ 1,677,777
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Aid-Israel, 0%, 2021 - 2024 7,830,000 3,213,579
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Fannie Mae, 4.625%, 2013 736,000 716,156
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Farmer Mac, 5.5%, 2011 (a) 3,010,000 3,057,489
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Federal Home Loan Bank, 4.5%, 2007 2,250,000 2,237,171
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Federal Home Loan Bank, 4.625%, 2008 9,090,000 9,028,052
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Freddie Mac, 4.2%, 2007 4,358,000 4,306,728
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Overseas Private Investment Corp., 0%, 2007 1,822,652 1,886,445
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Small Business Administration, 8.875%, 2011 161,744 168,441
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Small Business Administration, 6.34%, 2021 1,211,353 1,251,867
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Small Business Administration, 6.35%, 2021 1,353,548 1,398,780
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Small Business Administration, 6.44%, 2021 1,155,448 1,196,771
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Small Business Administration, 6.625%, 2021 1,264,655 1,319,304
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Small Business Administration, 4.98%, 2023 872,599 857,929
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Small Business Administration, 4.34%, 2024 1,250,069 1,182,938
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Small Business Administration, 4.72%, 2024 2,185,259 2,114,228
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Small Business Administration, 4.77%, 2024 2,218,476 2,152,870
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Small Business Administration, 4.86%, 2024 - 2025 2,661,085 2,588,572
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Small Business Administration, 4.87%, 2024 1,463,750 1,424,464
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Small Business Administration, 5.52%, 2024 1,355,284 1,367,042
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Small Business Administration, 4.76%, 2025 2,191,119 2,111,504
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Small Business Administration, 5.11%, 2025 1,335,319 1,317,131
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U.S. Department of Housing & Urban Development, 6.36%, 2016 1,580,000 1,629,945
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U.S. Department of Housing & Urban Development, 6.59%, 2016 5,612,000 5,720,177
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$ 53,925,360
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U.S. TREASURY OBLIGATIONS - 14.7%
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U.S. Treasury Bonds, 10.375%, 2012 $ 8,400,000 $ 8,930,578
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U.S. Treasury Bonds, 12%, 2013 3,036,000 3,443,252
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U.S. Treasury Bonds, 8.75%, 2017 6,100,000 8,090,601
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U.S. Treasury Bonds, 4.5%, 2036 6,301,000 5,930,325
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U.S. Treasury Notes, 6.5%, 2010 (f) 19,994,000 21,117,103
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U.S. Treasury Notes, 4.25%, 2015 4,400,000 4,243,936
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U.S. Treasury Notes, TIPS, 3.875%, 2009 2,716,716 2,807,131
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$ 54,562,926
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Total U.S. Bonds $320,178,917
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FOREIGN BONDS - 10.7%
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AUSTRALIA - 0.0%
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Commonwealth of Australia, 6.5%, 2013 AUD 132,000 $ 105,152
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AUSTRIA - 0.5%
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Republic of Austria, 5.5%, 2007 EUR 1,392,000 $ 1,821,533
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BRAZIL - 0.0%
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Federative Republic of Brazil, 8%, 2018 $ 102,000 $ 111,996
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CANADA - 0.1%
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Government of Canada, 4.5%, 2015 CAD 187,000 $ 174,525
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Government of Canada, 8%, 2023 CAD 243,000 319,333
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$ 493,858
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CAYMAN ISLANDS - 0.0%
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Petroleum Export/Cayman, 5.265%, 2011 (a) $ 95,630 $ 93,892
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CHILE - 0.4%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 314,000 $ 330,377
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Republic of Chile, FRN, 5.9%, 2008 1,057,000 1,060,700
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$ 1,391,077
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DENMARK - 0.1%
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Kingdom of Denmark, 4%, 2015 DKK 941,000 $ 164,283
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FINLAND - 0.9%
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Republic of Finland, 5.375%, 2013 EUR 2,257,000 $ 3,182,031
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FRANCE - 1.1%
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Republic of France, 4.75%, 2007 EUR 2,462,000 $ 3,187,776
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Republic of France, 4.75%, 2012 EUR 251,000 340,785
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Republic of France, 6%, 2025 EUR 224,000 363,844
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$ 3,892,405
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GERMANY - 1.5%
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Federal Republic of Germany, 3.5%, 2008 EUR 1,062,000 $ 1,360,986
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Federal Republic of Germany, 3.75%, 2015 EUR 1,128,000 1,447,553
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Federal Republic of Germany, 6.25%, 2030 EUR 199,000 339,359
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KfW Bankengruppe, FRN, 3.164%, 2007 EUR 874,000 1,119,395
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Landesbank Baden-Wurttemberg, 3.217%, 2007 EUR 272,000 348,521
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Landesbank Baden-Wurttemberg, FRN, 3.092%, 2007 EUR 290,000 371,533
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Landesbank Baden-Wuttemberg, FRN, 2.961%, 2007 EUR 510,000 653,582
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$ 5,640,929
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IRELAND - 1.2%
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Republic of Ireland, 4.25%, 2007 EUR 1,972,000 $ 2,546,021
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Republic of Ireland, 4.6%, 2016 EUR 1,385,000 1,893,204
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$ 4,439,225
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MALAYSIA - 0.1%
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Petronas Capital Ltd., 7.875%, 2022 $ 433,000 $ 517,859
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MEXICO - 0.7%
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Pemex Project Funding Master Trust, 9.375%, 2008 $ 1,072,000 $ 1,150,256
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United Mexican States, 8.125%, 2019 1,040,000 1,253,200
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United Mexican States, 8.3%, 2031 128,000 160,832
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$ 2,564,288
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NETHERLANDS - 0.9%
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Kingdom of Netherlands, 5.75%, 2007 EUR 1,169,000 $ 1,513,028
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Kingdom of Netherlands, 3.75%, 2009 EUR 1,383,000 1,782,399
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$ 3,295,427
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NORWAY - 0.0%
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Kingdom of Norway, 5%, 2015 NOK 920,000 $ 155,143
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PANAMA - 0.2%
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Republic of Panama, 9.375%, 2029 $ 677,000 $ 858,098
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RUSSIA - 0.4%
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Russian Federation, 3%, 2008 $ 1,474,000 $ 1,410,323
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SOUTH AFRICA - 0.3%
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Republic of South Africa, 9.125%, 2009 $ 855,000 $ 930,881
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SPAIN - 0.8%
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Kingdom of Spain, 6%, 2008 EUR 1,293,000 $ 1,711,161
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Kingdom of Spain, 5.35%, 2011 EUR 796,000 1,100,583
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$ 2,811,744
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UNITED KINGDOM - 1.5%
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Network Rail MTN Finance PLC, FRN, 3.255%, 2007 EUR 876,000 $ 1,122,446
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United Kingdom Treasury, 5.75%, 2009 GBP 794,000 1,556,201
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United Kingdom Treasury, 5%, 2012 GBP 952,000 1,844,475
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United Kingdom Treasury, 8%, 2015 GBP 410,000 984,497
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$ 5,507,619
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Total Foreign Bonds $ 39,387,763
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TOTAL BONDS $359,566,680
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REPURCHASE AGREEMENTS - 2.2%
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Merrill Lynch & Co., 5.28%, dated 8/31/06, due 9/01/06, total to be received
$8,260,211 (secured by various U.S. Treasury and Federal Agency obligations and
Mortgage Backed securities in a jointly traded account) $ 8,259,000 $ 8,259,000
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TOTAL INVESTMENTS(k) $367,825,680
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OTHER ASSETS, LESS LIABILITIES - 0.5% 1,707,157
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NET ASSETS - 100.0% $369,532,837
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(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in
transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of
these securities was $3,151,381, representing 0.9% of net assets.
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(k) As of August 31, 2006, the trust held securities fair valued in accordance with the policies adopted by the Board of
Trustees, aggregating $355,829,300 and 96.74% of market value, of which 96.57% of market value was provided by an
independent pricing service using an evaluated bid.
(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 security:
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
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Prudential Securities Secured Financing
Corp., FRN, 7.4499%, 2013 12/06/04 $2,019,445 $1,923,107 0.5%
The following abbreviations are used in this report and are defined:
FRN Floating Rate Note. The interest rate is the rate in effect as of 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
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) 08/31/2006
(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 $377,408,617
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Gross unrealized appreciation $ 2,402,346
Gross unrealized depreciation (11,985,283)
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Net unrealized appreciation (depreciation) $ (9,582,937)
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(2) FINANCIAL INSTRUMENTS
DERIVATIVES
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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 138,988 10/10/06 $ 105,673 $ 106,070 $ (397)
DKK 956,487 10/25/06 164,538 164,840 (302)
EUR 20,970,926 10/04/06 - 10/20/06 27,015,550 26,948,929 66,621
GBP 2,323,571 10/02/06 4,340,804 4,428,167 (87,363)
NOK 998,635 9/11/06 159,020 158,101 919
NZD 248,939 10/10/06 153,623 162,815 (9,192)
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$31,939,208 $31,968,922 $(29,714)
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PURCHASES
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EUR 263,734 10/04/06 $ 336,487 $ 338,654 $ 2,167
NZD 261,094 10/10/06 166,244 170,765 4,521
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$ 502,731 $ 509,419 $ 6,688
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At August 31, 2006, forward foreign currency purchases and sales under master netting agreements excluded
above amounted to a net payable of $3,984 with Merrill Lynch International.
FUTURES CONTRACTS
UNREALIZED
EXPIRATION APPRECIATION
CONTRACTS VALUE DATE (DEPRECIATION)
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U.S. Treasury Bond 10 yr (Long) 31 $3,328,625 Dec-06 $ 6,431
U.S. Treasury Note 5 yr (Short) 54 5,675,906 Dec-06 (14,533)
U.S. Treasury Bond (Short) 59 6,552,688 Dec-06 (14,957)
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$(23,059)
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At August 31, 2006, 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: October 19, 2006
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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: October 19, 2006
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By (Signature and Title)* TRACY ATKINSON
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Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: October 19, 2006
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* Print name and title of each signing officer under his or her signature.