RAWALPINDI, Pakistan (Reuters) – A suspected Taliban suicide bomb killed at least 35 people in the Pakistani city of Rawalpindi yesterday, officials said, as the government announced a reward for the capture, dead or alive, of the group’s leaders.

Pakistan Taliban militants are being squeezed out of their strongholds near the Afghan border by a massive army offensive, but have retaliated by stepping up bomb attacks and raids on urban targets.

The army offensive is being closely watched by the United States and other powers embroiled in neighbouring Afghanistan, as the border area has become a sanctuary for insurgents from both countries as well as foreign al Qaeda militants.  Yesterday’s blast came as the Pakistan government announced rewards worth $5 million for information leading to the capture, dead or alive, of Pakistan Taliban leader Hakimullah Mehsud and more than a dozen other militant leaders.  The attack in Rawalpindi, a large sprawling city that twins the smaller, administrative capital of Islamabad, took place in an area that is home to the army headquarters as well as some hotels.

Last month militants launched a brazen attack on the army headquarters, taking dozens of people hostage before commandos stormed the building and rescued them.

Officials said many of yesterday’s victims were elderly people who had gathered at a bank to withdraw their pensions. The military said four soldiers were among those killed.

“It was a huge blast. Smoke is rising from the scene,” Nasir Naqvi, who runs a travel agency near the site of the blast, told Reuters.

Two suspected militants were later killed by a second bomb that exploded during a routine vehicle check in the eastern city of Lahore, police said. They said 15 people were wounded by the blast, three seriously, including several police officers.