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RAWALPINDI, Pakistan (Reuters) - A suspected Taliban suicide bomb killed at least 35 people in the Pakistani city of Rawalpindi on Monday, officials said, as the government announced a reward for the capture, dead or alive, of the group's leader.
Pakistan Taliban militants are being squeezed out of their remote strongholds on the Afghan border by a massive army offensive and have retaliated by stepping up bomb attacks and commando-style raids on urban targets.
The army offensive is being closely watched by the U.S. and other powers embroiled in neighbouring Afghanistan, as the border area has become a sanctuary for insurgent groups from both countries as well as foreign al Qaeda militants.
Monday's blast came as the Pakistan government announced rewards of up to $5 million (3 million pound) for information leading to the capture, dead or alive, of Pakistan Taliban leader Hakimullah Mehsud and more than a dozen other leaders.
(For a Who's Who of the most wanted, see)
The attack in Rawalpindi, a large sprawling city that twins the smaller, administrative capital, Islamabad, took place in an area that is home to the army headquarters as well as some hotels.
Officials said many of the victims were elderly people who had gathered at a bank to withdraw their pensions. TV stations showed ambulances and police vehicles racing through the streets, sirens wailing.
"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.
Last month militants launched a brazen attack on the Pakistani army headquarters in Rawalpindi, taking dozens of people hostage before commandos stormed the building and rescued them.
The announcement of the bounty on Hakimullah's head was made through newspaper advertisements as security forces zeroed in on his Tehrik-e-Taliban Pakistan (Taliban Movement of Pakistan) strongholds in South Waziristan.
"These people are definitely killers of humanity and deserve exemplary punishment," read the front-page advertisement, with photographs of Hakimullah and seven senior lieutenants, in The News.
"Help the government of Pakistan so that these people meet their nemesis," the advert said.
A reward of over $600,000 each was announced for Hakimullah, who is regarded as violent and brutal, and his top aide Wali-ur-Rehman, regarded as more thoughtful and canny.
The same amount was offered for Qari Hussain Mehsud, who is Hakimullah's cousin and also known as "the mentor of suicide bombers."
The trio spoke last month to a group of journalists in Sararogha, a major Taliban base in South Waziristan, but have not been sighted since.
Security forces have captured Kotkai, the birthplace of Hakimullah and hometown of Hussain, in the Waziristan offensive, and on Sunday the military said it was on the outskirts of Sararogha and Makeen, also strongholds of Hakimullah.
In the deadliest militant attack in more than two years, more than 100 people were killed and scores more wounded on Wednesday when a car bomb detonated in a crowded market in the northwest frontier city of Peshawar.
In a related development, the United Nations on Tuesday announced it had raised a security alert for the Northwest Frontier Province and Federally Administered Tribal Areas -- which include Waziristan -- ordering all non-essential international staff to leave.
The security situation has also hit the stock market, with the Karachi exchange index ending 3.13 percent lower to close at 8,872.40.
"The market started on the lower side today but the slide accelerated following the bombing in Rawalpindi," said Khalid Iqbal Siddiqui, director at brokers Invest and Finance Securities.

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