(For full coverage of Pakistan, click on [ID:nAFPAK])
* Up to $5 million offered for Taliban leaders, dead or alive
* Army captures more militant strongholds
* U.N. raises security level in sensitive areas
* Stock market index dips 3 pct on security fears
* Two militants killed in bomb blast in Lahore
By Augustine Anthony
RAWALPINDI, Pakistan, Nov 2 (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 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.
Monday'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.
(For a Who's Who of the most wanted, see [ID:nISL496189])
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 Monday'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.
Last week, in the deadliest militant attack in more than two years, more than 100 people were killed and scores more wounded when a car bomb detonated in a crowded market in the northwest frontier city of Peshawar.
WANTED, DEAD OR ALIVE
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 ad said.
A reward of more than $600,000 each was announced for Hakimullah, who is regarded as violent and brutal, and his top aide Wali-ur-Rehman, believed to be more thoughtful and canny.
The same amount was offered for Qari Hussain Mehsud, Hakimullah's cousin who is 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.
Government forces had captured Kaniguram and Karama, two hubs for Uzbek militants, military spokesman Major-General Athar Abbas told a news conference on Monday.
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
falling 3.1 percent on Monday.
"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. (For more Reuters coverage of Afghanistan and Pakistan, see: