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, 2007
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ITEM 1. SCHEDULE OF INVESTMENTS.
MFS(R) GOVERNMENT MARKETS INCOME TRUST
8/31/07
Quarterly portfolio holdings
[graphic omitted]
M F S(R)
INVESTMENT MANAGEMENT
MFS Government Markets Income Trust
PORTFOLIO OF INVESTMENTS (Unaudited) 8/31/07
ISSUER SHARES/PAR VALUE ($)
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BONDS - 94.3%
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U.S. BONDS - 84.5%
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AGENCY - OTHER - 7.8%
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Financing Corp., 10.7%, 2017 $ 4,095,000 $ 5,876,063
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Financing Corp., 9.4%, 2018 3,085,000 4,136,149
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Financing Corp., 9.8%, 2018 4,350,000 5,987,444
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Financing Corp., 10.35%, 2018 6,820,000 9,747,178
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Financing Corp., STRIPS, 0%, 2017 5,000,000 3,009,905
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$ 28,756,739
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ASSET BACKED & SECURITIZED - 0.5%
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Prudential Securities Secured Financing Corp., FRN, 7.385%, 2013 (z) $ 1,819,000 $ 1,928,885
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MORTGAGE BACKED - 49.3%
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Fannie Mae, 5.78%, 2008 $ 891,683 $ 891,052
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Fannie Mae, 4.79%, 2012 3,522,804 3,479,088
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Fannie Mae, 4.543%, 2013 842,879 812,794
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Fannie Mae, 4.845%, 2013 996,819 973,517
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Fannie Mae, 5%, 2013 - 2027 12,874,218 12,710,090
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Fannie Mae, 5.06%, 2013 398,909 392,882
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Fannie Mae, 5.37%, 2013 1,032,350 1,049,879
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Fannie Mae, 4.547%, 2014 941,479 902,351
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Fannie Mae, 4.6%, 2014 479,757 464,410
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Fannie Mae, 4.666%, 2014 2,727,859 2,631,186
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Fannie Mae, 4.77%, 2014 489,334 471,744
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Fannie Mae, 4.839%, 2014 3,251,056 3,158,976
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Fannie Mae, 4.871%, 2014 1,792,725 1,747,722
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Fannie Mae, 4.88%, 2014 - 2020 751,547 732,955
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Fannie Mae, 5.1%, 2014 523,371 519,353
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Fannie Mae, 4.56%, 2015 619,490 594,289
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Fannie Mae, 4.62%, 2015 689,160 664,676
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Fannie Mae, 4.665%, 2015 417,913 403,478
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Fannie Mae, 4.69%, 2015 341,578 330,442
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Fannie Mae, 4.7%, 2015 479,440 463,831
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Fannie Mae, 4.74%, 2015 388,145 372,818
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Fannie Mae, 4.78%, 2015 544,016 527,559
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Fannie Mae, 4.815%, 2015 543,000 523,160
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Fannie Mae, 4.82%, 2015 1,454,929 1,408,562
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Fannie Mae, 4.85%, 2015 341,492 333,428
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Fannie Mae, 4.86%, 2015 162,030 158,549
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Fannie Mae, 4.87%, 2015 361,925 353,297
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Fannie Mae, 4.89%, 2015 405,530 396,764
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Fannie Mae, 4.925%, 2015 1,341,668 1,304,422
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Fannie Mae, 5.471%, 2015 941,872 943,767
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Fannie Mae, 5.09%, 2016 500,000 491,227
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Fannie Mae, 5.423%, 2016 798,292 796,789
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Fannie Mae, 5.845%, 2016 496,423 511,366
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Fannie Mae, 6.5%, 2016 - 2036 7,947,688 8,113,812
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Fannie Mae, 5.05%, 2017 525,300 514,419
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Fannie Mae, 5.3%, 2017 598,234 595,611
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Fannie Mae, 5.5%, 2017 - 2035 60,168,983 59,008,179
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Fannie Mae, 6%, 2017 - 2037 17,853,403 17,917,791
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Fannie Mae, 4.5%, 2019 13,479,665 12,954,448
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Freddie Mac, 4.5%, 2013 - 2021 1,725,477 1,717,284
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Freddie Mac, 4.375%, 2015 1,691,631 1,656,057
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Freddie Mac, 5%, 2016 - 2027 13,243,449 13,198,049
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Freddie Mac, 6%, 2021 - 2036 2,876,637 2,881,286
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Freddie Mac, 4%, 2024 770,419 760,836
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Freddie Mac, 5.5%, 2024 - 2035 11,245,281 11,043,620
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Freddie Mac, 6.5%, 2037 3,096,365 3,143,133
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Ginnie Mae, 5.5%, 2033 6,977,792 6,868,704
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$181,889,652
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MUNICIPALS - 1.7%
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California Educational Facilities Authority Rev. (Stanford University), "T-1", 5%, 2039 $ 3,075,000 $ 3,283,946
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Puerto Rico Highway and Transportation Authority Rev.,"N", 5.25%, 2039 2,840,000 3,096,367
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$ 6,380,313
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U.S. GOVERNMENT AGENCIES - 11.9%
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Aid-Egypt, 4.45%, 2015 1,755,000 $ 1,692,908
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Farmer Mac, 5.5%, 2011 (n) 3,010,000 3,080,943
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Federal Home Loan Bank, 4.625%, 2008 9,090,000 9,067,039
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Freddie Mac, 6.625%, 2009 4,159,000 4,309,735
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Small Business Administration, 8.875%, 2011 134,756 136,591
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Small Business Administration, 6.34%, 2021 970,246 998,805
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Small Business Administration, 6.35%, 2021 1,134,630 1,168,069
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Small Business Administration, 6.44%, 2021 984,007 1,015,070
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Small Business Administration, 6.625%, 2021 1,091,262 1,131,114
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Small Business Administration, 4.98%, 2023 797,316 787,427
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Small Business Administration, 4.34%, 2024 1,168,000 1,109,713
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Small Business Administration, 4.72%, 2024 1,939,863 1,881,135
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Small Business Administration, 4.77%, 2024 1,955,662 1,905,968
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Small Business Administration, 4.86%, 2024 - 2025 2,433,053 2,375,609
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Small Business Administration, 4.87%, 2024 1,324,578 1,293,787
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Small Business Administration, 5.52%, 2024 1,222,152 1,234,013
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Small Business Administration, 4.76%, 2025 2,011,992 1,945,709
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Small Business Administration, 5.11%, 2025 1,233,793 1,223,063
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U.S. Department of Housing & Urban Development, 6.36%, 2016 1,580,000 1,629,934
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U.S. Department of Housing & Urban Development, 6.59%, 2016 5,612,000 5,686,393
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$ 43,673,025
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U.S. TREASURY OBLIGATIONS - 13.3%
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U.S. Treasury Bonds, 11.25%, 2015 $ 499,000 $ 711,348
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U.S. Treasury Bonds, 10.625%, 2015 3,006,000 4,228,597
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U.S. Treasury Bonds, 8.75%, 2017 6,100,000 8,050,573
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U.S. Treasury Bonds, 4.5%, 2036 1,000,000 947,891
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U.S. Treasury Bonds, STRIPS, 0%, 2021 4,547,000 2,255,107
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U.S. Treasury Bonds, STRIPS, 0%, 2027 3,064,000 1,134,376
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U.S. Treasury Notes, 6.5%, 2010 (f) 12,594,000 13,258,132
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U.S. Treasury Notes, 10.375%, 2012 8,400,000 8,501,060
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U.S. Treasury Notes, 12%, 2013 3,036,000 3,247,810
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U.S. Treasury Notes, TIPS, 3.875%, 2009 2,789,711 2,828,287
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U.S. Treasury Notes, TIPS, 2.375%, 2017 3,831,768 3,826,978
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$ 48,990,159
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Total U.S. Bonds $ 311,618,773
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FOREIGN BONDS - 9.8%
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ARGENTINA - 0.1%
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Republic of Argentina, FRN, 5.389%, 2012 $ 630,000 $ 554,513
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AUSTRIA - 0.5%
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Republic of Austria, 4.65%, 2018 EUR 1,201,000 $ 1,673,050
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BRAZIL - 0.0%
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Federative Republic of Brazil, 8%, 2018 $ 102,000 $ 112,200
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CANADA - 0.3%
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Canada Housing Trust, 4.6%, 2011 CAD 179,000 $ 169,947
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Government of Canada, 5.5%, 2009 CAD 356,000 343,812
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Government of Canada, 4.5%, 2015 CAD 306,000 291,927
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Government of Canada, 5.75%, 2033 CAD 107,000 121,250
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$ 926,936
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CHILE - 0.1%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 314,000 $ 335,132
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DENMARK - 0.1%
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Kingdom of Denmark, 4%, 2015 DKK 1,771,000 $ 317,196
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FRANCE - 0.8%
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Republic of France, 4.75%, 2012 EUR 349,000 $ 487,629
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Republic of France, 5%, 2016 EUR 585,000 837,577
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Republic of France, 6%, 2025 EUR 235,000 377,744
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Republic of France, 4.75%, 2035 EUR 962,000 1,347,163
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$ 3,050,113
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GERMANY - 1.8%
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Federal Republic of Germany, 5.25%, 2010 EUR 1,758,000 $ 2,467,947
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Federal Republic of Germany, 3.75%, 2015 EUR 828,000 1,096,573
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Federal Republic of Germany, 6.25%, 2030 EUR 707,000 1,189,602
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KfW Bankengruppe, 1.35%, 2014 JPY 199,000,000 1,716,335
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$ 6,470,457
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INDONESIA - 0.2%
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Majapahit Holding B.V., 7.75%, 2016 $ 741,000 $ 728,033
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IRELAND - 0.4%
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Republic of Ireland, 4.6%, 2016 EUR 940,000 $ 1,304,828
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JAPAN - 1.9%
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Development Bank of Japan, 1.75%, 2010 JPY 84,000,000 $ 739,724
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Development Bank of Japan, 1.4%, 2012 JPY 126,000,000 1,098,894
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Development Bank of Japan, 1.05%, 2023 JPY 178,000,000 1,330,484
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Development Bank of Japan, 2.3%, 2026 JPY 60,000,000 527,741
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Japan Finance Corp. for Municipal Enterprises, 1.55%, 2012 JPY 126,000,000 1,108,513
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Japan Finance Corp. for Municipal Enterprises, 2%, 2016 JPY 230,000,000 2,056,047
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$ 6,861,403
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KAZAKHSTAN - 0.2%
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Intergas Finance B.V., 6.375%, 2017 $ 776,000 $ 723,620
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MALAYSIA - 0.1%
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Petronas Capital Ltd., 7.875%, 2022 $ 433,000 $ 509,998
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MEXICO - 0.7%
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Pemex Project Funding Master Trust, 9.375%, 2008 $ 1,072,000 $ 1,118,096
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United Mexican States, 8.3%, 2031 128,000 164,160
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United Mexican States, 6.75%, 2034 1,164,000 1,264,104
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$ 2,546,360
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NETHERLANDS - 1.0%
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Kingdom of Netherlands, 3.75%, 2009 EUR 2,388,000 $ 3,229,042
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Kingdom of Netherlands, 3.75%, 2014 EUR 487,000 644,673
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$ 3,873,715
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PANAMA - 0.2%
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Republic of Panama, 9.375%, 2029 $ 677,000 $ 883,485
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RUSSIA - 0.2%
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OAO Gazprom, 7.288%, 2037 (z) $ 731,000 $ 745,620
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SOUTH AFRICA - 0.2%
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Republic of South Africa, 5.875%, 2022 $ 855,000 $ 824,006
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SPAIN - 0.5%
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Kingdom of Spain, 5.35%, 2011 EUR 1,250,000 $ 1,777,483
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UNITED KINGDOM - 0.5%
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United Kingdom Treasury, 8%, 2015 GBP 255,000 $ 612,945
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United Kingdom Treasury, 8%, 2021 GBP 265,000 695,539
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United Kingdom Treasury, 4.25%, 2036 GBP 367,000 710,897
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$ 2,019,381
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Total Foreign Bonds $ 36,237,529
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TOTAL BONDS $347,856,302
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REPURCHASE AGREEMENTS - 5.1%
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Merrill Lynch, 5.3%, dated 8/31/07, due 9/04/07, total to be received $18,889,117
(secured by various U.S. Treasury and Federal Agency obligations and Mortgage
Backed securities in a jointly traded account) $ 18,878,000 $ 18,878,000
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TOTAL INVESTMENTS(k) $366,734,302
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OTHER ASSETS, LESS LIABILITIES - 0.6% 2,351,606
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NET ASSETS - 100.0% $369,085,908
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(k) As of August 31, 2007, the trust held securities fair valued in accordance with the policies adopted by the Board of
Trustees, aggregating $347,301,787 and 94.70% of market value. An independent pricing service provided an evaluated bid for
94.17% 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 $3,080,943, representing 0.8% 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:
CURRENT TOTAL % OF
ACQUISITION ACQUISITION MARKET NET
RESTRICTED SECURITIES DATE COST VALUE ASSETS
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OAO Gazprom, 7.288%, 2037 8/24/07 $ 740,138 $ 745,620
Prudential Securities Secured Financing Corp., FRN, 7.385%, 2013 12/06/04 2,019,445 1,928,885
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Total Restricted Securities $2,674,505 0.7%
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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
SGD Singapore Dollar
See attached supplemental information. For more information see notes to financial statements as disclosed in the most recent
semiannual or annual report.
MFS GOVERNMENT MARKETS INCOME TRUST
SUPPLEMENTAL INFORMATION (UNAUDITED) 8/31/07
(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 $376,092,574
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Gross unrealized appreciation $ 2,421,549
Gross unrealized depreciation (11,779,821)
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Net unrealized appreciation (depreciation) $ (9,358,272)
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The aggregate cost above includes prior fiscal year end tax adjustments.
(2) FINANCIAL INSTRUMENTS
DERIVATIVES
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AT 8/31/07
Appreciation and Depreciation in the table below are reported by currency.
NET UNREALIZED
CONTRACTS TO SETTLEMENT CONTRACTS APPRECIATION
TYPE CURRENCY DELIVER/RECEIVE DATE RANGE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
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APPRECIATION
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Sell CAD 587,924 9/17/07 $ 563,956 $ 557,486 $ 6,470
Sell DKK 1,785,489 10/10/07 331,463 327,221 4,242
Buy EUR 1,680,277 9/17/07 2,236,675 2,291,157 54,482
Sell EUR 1,182,265 9/19/07 1,636,145 1,612,235 23,910
Buy GBP 59,936 9/19/07 118,167 120,821 2,654
Sell GBP 297,162 9/19/07 611,958 599,033 12,925
Buy JPY 110,794,058 9/18/07 951,790 959,083 7,293
Sell SGD 1,385,959 9/04/07 911,282 908,431 2,851
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$ 114,827
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DEPRECIATION
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Buy AUD 7,334 9/19/07 $ 6,278 $ 5,991 $ (287)
Sell CAD 377,361 9/17/07 354,826 357,824 (2,998)
Sell EUR 12,708,361 9/17/07 - 9/19/07 16,968,538 17,330,100 (361,562)
Buy GBP 99,736 9/19/07 204,647 201,053 (3,594)
Sell GBP 862,965 9/19/07 1,704,410 1,739,605 (35,195)
Sell JPY 1,095,173,272 9/18/07 9,012,807 9,480,313 (467,506)
Buy SGD 1,386,918 9/04/07 - 10/04/07 920,416 909,061 (11,355)
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$(882,497)
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FUTURES CONTRACTS OUTSTANDING AT 8/31/07
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
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U.S. Treasury Bond (Short) 59 6,582,188 Dec-07 $ (6,660)
U.S. Treasury Note 5 yr (Short) 54 5,761,969 Dec-07 10,787
U.S. Treasury Note 10 yr (Long) 119 12,976,578 Dec-07 61,873
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$ 66,000
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At August 31, 2007, the trust had sufficient cash and/or other liquid 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 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: October 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: October 16, 2007
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* Print name and title of each signing officer under his or her signature.