Rising interest rates usually help banks increase the spread between the amount that they pay for deposits and what they can charge for loans. It is one of the reasons why banks that are not hamstrung with inordinate levels of bad loans on their balance sheets are gaining traction among investors. One example of the resurgence in the sector is the SPDR KBW Bank ETF (KBE).

First of all, if you have any doubts that interest rates are going up, consider the runaway U.S. government spending that is sending the nation’s deficit to unprecedented new heights. Look no further than The New York Times to affirm that interest rates are destined to climb. The newspaper published an April 11 article, “Interest Rates Have Nowhere to Go but Up,” explaining that economists claim it is an inevitable result of the nation’s soaring debt and budding economic recovery.

As for KBE, the fund jumped 21.9% in the first quarter of this year and it rose 5.77% so far this month through April 13. The SPDR KBW Bank ETF features well-know financial institutions among its holdings. As of the end of March, the fund’s top ten positions and their weightings featured Bank of America, 9.96%; Citigroup, 7.83%; Wells Fargo & Co., 7.37%; JP Morgan Chase & Co., 6.26%; US Bancorp, 6.21%; Regions Financial Corp., 4.81%; Fifth Third Bancorp, 4.45%; BB&T, 4.39%; SunTrust, 4.39%; and M&T Bank, 4.36%. As that list shows, the fund includes a nice mix of money center banks and big regional banks.

KBE also is a pure play on the financial sector, since 100% of its holdings consist of investments in that arena. By all means, only consider investing in KBE with a modest amount of money as a way to diversify your overall portfolio and potentially ride the recovering banking companies to heightened gains. The fund is designed to match the returns and characteristics of the KBW Bank Index, before accounting for expenses. The index rose 86.93% during the past year, as of March 31, on an annualized basis.

Keep in mind that the banking sector is trying to recover from a difficult last few years when even some of the best-known financial institutions struggled or required government bailouts. The use of an ETF is a great way to avoid the possibility of trouble at one bank destroying your investment in the banking sector. KBE is not one of my current recommendations, but it is a fund that certainly has caught my eye.

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