A popular exchange traded fund tracking the U.S. financial sector rallied nearly 2% in premarket dealings Wednesday following news that Bank of America (NYSE: BAC) is in an $8.5 billion settlement related to toxic mortgages.

Bank of America shares jumped as much as 6% before the bell.

The banking giant on Wednesday morning said it has reached an agreement to repurchase mortgage-backed securities packaged by Countrywide Financial, which Bank of America purchased in the credit crisis.

Evercore Partners in a note said the deal should remove some of the overhang on Bank of America shares. The stock was down nearly 20% year to date as of Tuesday’s close.

The settlement is “a step forward in rebuilding management credibility,” Evercore said, but there is “still a long road ahead in terms of addressing key investor concerns,” including handling the second round of bank stress tests and high turnover in the executive ranks at B. of A.

Financial Select Sector SPDR Fund (NYSEArca: XLF) rose 1.7% in preopen trade Wednesday. The ETF has more than 6% of assets invested in Bank of America. Expectations that lawmakers in Greece would vote yes on austerity measures also boosted sentiment in the banking sector on Wednesday. [Metals ETFs Rise with Focus on Greek Vote]

Financial Select Sector SPDR Fund

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