SARAJEVO, Bosnia-Herzegovina (AP) _ Mortar shells crashed into a breadline today, killing three people and wounding 20. But fighting slowed after two days of intense bombardment by Serbs in the surrounding hills.

The attack came as world leaders meeting in London neared agreement to expand the U.N. military force in embattled Bosnia, after telling Serbian-led Yugoslavia to choose peace or banishment from the international community.

The shelling occurred this morning, a day after the heaviest Serb artillery attack on Sarajevo in weeks.

Bosnian authorities for the last two days have been broadcasting warnings, telling people to stay off the street after 1 p.m. Everyone is now shopping and getting bread and water before that time, so the streets are crowded in the morning.

The shells crashed into the breadline, and women ran screaming with children in their arms. Old men and women tripped over one another. Blood from the attack splattered over bread being distributed.

At the conference in London, a draft statement circulated by British officials held out a promise of international aid to meet Bosnia's humanitarian needs and rebuild the economy if the fighting stops.

Western leaders warned of war crimes trials for parties who hindered a settlement.

But Radovan Karadzic, leader of Bosnia's rebel Serbs, was uncompromising about the Serbs' intention to create their own state from Bosnian territory.

''We have our own country and there will be no bargaining,'' he said, insisting that Bosnia-Herzegovina ''doesn't exist anymore.''

Previous peace conferences have failed to end the fighting, which began after Bosnia's majority Muslims and Croats voted for independence on Feb. 29. Serb militias rebelled and seized about two-thirds of Bosnian territory, which they want to remain united with the remnants of Yugoslavia.

At least 8,000 people have been killed in the fighting, and more than 1 million are homeless. U.S. Senate investigators say up to 35,000 have died.

Acting U.S. Secretary of State Lawrence Eagleburger warned in London of a ''spectacularly bleak future'' for Serbs if they did not end their siege of Sarajevo and other cities held by Bosnia's Muslim-led government.

Serbs in the hills encircling Sarajevo pummeled the city Wednesday with rockets and mortar shells, and raked streets and buildings with heavy machine- gun fire in a second day of intense fighting.

The United Nations said that one of its trucks was destroyed by mortar fire, and two barracks housing U.N. peacekeepers came under mortar fire, forcing soldiers to hide in shelters. No troops were injured.

The attack set fire to the city's Turkish baths and a set of 17th century rowhouses. At the library, some 155,000 rare or old books that had been moved to the library's basement were thought to be safe.