(c) 2013, Bloomberg News.

(c) 2013, Bloomberg News.

BANGKOK Thailand's baht fell to a 12-week low and government bonds dropped as protesters seeking to oust Prime Minister Yingluck Shinawatra vowed more unrest after clashes left three dead in Bangkok at the weekend.

The cost of insuring the nation's sovereign debt from default rose Monday after anti-government protesters removed barriers surrounding Government House and the Metropolitan Police Bureau, and police spokesman Piya Utayo said tear gas was fired to repel them. Global funds pulled a net $2.8 billion from Thai bonds and equities in November, official data show. Bank of Thailand Governor Prasarn Trairatvorakul said Nov. 30 that consumption, investment and tourism are being affected.

"You just don't want to buy the baht or Thai assets as we are seeing chaotic scenes on television quite frequently," said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. "Investors are not sure how it will end, while there's growing concern about the impact on the economy as it's prolonged."

The baht dropped 0.4 percent to 32.17 per dollar as of 4:24 p.m. in Bangkok and reached 32.285 earlier, the weakest level since Sept. 9, according to data compiled by Bloomberg. It may break through a three-year low of 32.48 reached on Sept. 6 in a week or so if the protests continue, Soma said. The currency weakened 2.9 percent last month, the most since May.

The baht may test the three-year low, according to a research note Monday by Mitul Kotecha, global head of foreign- exchange strategy in Hong Kong at Credit Agricole CIB.

"As noted by the BoT governor, the protests are affecting the economic outlook," Kotecha wrote.

The cost of credit-default swaps insuring Thai sovereign debt from default rose one basis point to 126, according to data compiled by Bloomberg. The gauge jumped 20 basis points in November, snapping three months of declines.

Suthep Thaugsuban, head of the protesters and a former deputy prime minister with the main opposition Democrat Party, has called for Thailand's democratic system to be replaced by a representative assembly consisting of people from a cross- section of society.

Prime Minister Yingluck said Monday that setting up a so- called parliament of the people isn't possible under the country's current constitution.

"I don't want to be a problem for the country," Yingluck said in a televised media briefing. "A demand for resignation and house dissolution is more reasonable. But the establishment of a people's parliament is unimaginable."

Parties linked to Yingluck's brother Thaksin Shinawatra, who was ousted in a 2006 coup, have won the past five elections on support from the rural north and northeastern provinces. The protests in Bangkok are led by the Democrats, who haven't won a national poll in more than 20 years.

The central bank trimmed its benchmark interest rate on Nov. 27 by a quarter of a percentage point to 2.25 percent, a decision not predicted by any of 19 economists surveyed by Bloomberg. There is "a good chance" of further monetary policy easing by the Bank of Thailand at its Jan. 22 meeting if political tensions haven't subsided by then, according to a Morgan Stanley research note Monday written led by economists Deyi Tan and Zhixiang Su in Singapore.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined one basis point, or 0.01 percentage point, to 6.3 percent.

The yield on the 3.625 percent government bonds due June 2023 rose six basis points to 4.2 percent, data compiled by Bloomberg show. The rate reached 4.28 percent on Nov. 25, the highest level in more than two months.

_ With assistance from Anuchit Nguyen, Suttinee Yuvejwattana and Supunnabul Suwannakij in Bangkok, Lilian Karunungan in Singapore and Yidi Zhao in Hong Kong.