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The explosion occurred at 7.15 AM outside the gate of the army's National Logistics Cell in Royal Artillery Bazar, a high security area located very close to the army's General Headquarters.
It destroyed the bus carrying trainee doctors from the Army Medical College to the Combined Military Hospital in Rawalpindi.
Eyewitnesses and journalists said at least eight persons had died though officials confirmed only three deaths.
The powerful blast was heard from kilometres away and hurled the bus several feet away. Several other vehicles and motorcycles were also damaged, eyewitnesses said.
Rescue workers and ambulances rushed to the site soon after the blast, and security forces sealed off the area.
Journalists and passers-by were sent away from the site as investigators scoured the area for clues.
Besides the Combined Military Hospital, several other key army installations are located in the area around the General Headquarters which is passed in the morning by scores of security personnel going to work.
Rawalpindi adjoins Islamabad and has witnessed a wave of suicide attacks by the Taliban and al Qaeda militants. On Dec 27, former premier Benazir Bhutto was killed in a gun and suicide attack during an election rally.
The same area had witnessed a suicide bombing on September 4 last year that killed 25 people. Seven people were killed in another suicide attack near President Pervez Musharraf's military office on October 30.

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