It appears your "yes" does not catch SIGPIPE.  I've reproduced the issue with

$ python -c 'import sys, os; sys.stdout.write(os.popen("while :; do echo yes ; done | echo hello").read())'
Traceback (most recent call last):
  File "<string>", line 1, in <module>
KeyboardInterrupt

The documentation on Python module signal says SIGPIPE is ignored by Python as well.  My work-around to this was to catch SIGPIPE, but the GNU C library would terminate the whole script.

$ python -c 'import sys, os, signal; signal.signal(signal.SIGPIPE, signal.SIG_DFL); sys.stdout.write(os.popen("while :; do echo yes ; done | echo hello").read())'
hello

http://www.gnu.org/software/libc/manual/html_node/Operation-Error-Signals.html

Perhaps, writing own signal handler might help.