By Ranga Sirilal and Shihar Aneez
COLOMBO (Reuters) - Sri Lanka's president said its troops captured the separatist Tamil Tigers' headquarters town of Kilinochchi on Friday, but within an hour of the announcement a suspected suicide bomber killed at least two people in the capital.
Troops fought their way into the Tiger stronghold of Kilinochchi deep in the north, in one of the biggest blows for the rebels in years. Details of casualties from the fighting were not immediately available.
"It was the constant dream of all Sri Lankans, whether Sinhala, Tamil or Muslim, who are opposed to separatism, racism, and terrorism, and have always, sought peace, freedom and democracy. Today our heroic troops have made that dream a reality," President Mahinda Rajapaksa said in a nationally televised address.
"A short while ago, our brave and heroic troops have fully captured Kilinochchi that was considered the main bastion of the LTTE."
Soon afterwards, a suspected suicide attacker riding a motorcycle struck near the headquarters of the Sri Lankan Air Force, a military official said.
"At least two people were killed from the suicide attack near the Air Force headquarters," a spokesman at the Media centre for national security said, asking not to be named. Hospital officials said 30 people were admitted with blast injuries.
The Liberation Tigers of Tamil Eelam, who have been fighting for a separate homeland for minority Tamils in the east and north of the island for a quarter of a century, could not immediately be reached for comment.
Military officials say the rebels have in the past hit back with suicide bombings in the capital and elsewhere whenever they have come under pressure on the northern frontlines.
Kilinochchi, in the Northern Province, has long been the centre of the Tamil fight for an independent homeland, which has seen more than 70,000 people killed in a bitter civil war since 1983.
"This is a major defeat for the LTTE. The fall of Kilinochchi means the LTTE will have their only territory in Mullaitivu," said Iqbal Athas, a defence analyst with Jane's Defence, referring to a rebel stronghold in the northeast.
"I would not say this is the end of the war, but it may be the beginning of the shrinking of major LTTE dominated areas."
The fall of the rebels' de facto capital was greeted with the bursting of firecrackers in Colombo. Others waved the national flag as they drove through the streets of the capital.
"The capture indicates very clearly that the LTTE's attempt to build up a quasi-state has now collapsed," Pakiasothy Saravanamuttu, a political analyst, said.
Sri Lanka's military has been closing in on Kilinochchi since September. Over the past month, it has been assaulting Tiger defences encircling the town and both sides have claimed to have inflicted ever higher death tolls on the other.
Sources from Rajapaksa's office earlier told Reuters that troops had entered Kilinochchi from two locations and that fighting with rebels was going on.
"Troops are inside the town and they are mopping up things here and there," said a military source who asked not to be identified.
State media said many rebels had fled the town.
The military developments powered the island nation's stock market higher. The Colombo All-Share index closed 5 percent up. The market fell 40.8 percent last year on economic and war worries.
"With the news of Kilinochchi's fall, sentiment just got a boost," said Geeth Balasuriya, assistant research manager at HNB Stockbrokers.
The LTTE started fighting the government in 1983. It says it is battling for the rights of minority Tamils in the face of mistreatment by successive governments led by the Sinhalese majority since Sri Lanka won independence from Britain in 1948.
Exactly a year ago, Rajapaksa's government formally scrapped an increasingly tattered six-year truce brokered by Norway, saying the rebels were using it as cover to regroup and re-arm.
(Editing by Sanjeev Miglani and Alex Richardson)