Though not a dedicated regional bank of the same ilk as the SPDR S&P Regional Banking ETF (NYSEArca: KRE), KBE is regional bank-heavy. KBE allocates over 77% of its weight to regional banks and that is important when remembering KRE’s holdings have an average beta of +0.44 to moves in the US 10 Year Treasury. [A Breakout for Regional Bank ETFs]

Higher long-term rates help the sector since many banks borrow at short-term rates and lend at long-term rates, capitalizing on a widening spread.

“If you believe that the Federal Reserve is on hold in part due to the weak data as sketched out above and the search for yield will trump the net interest margin (NIM) argument on a steeper yield curve,then getting long on IYR and short of KBE makes more sense than just buying KBE outright on a relative rotation at the sector level,” adds Azous.

Some investors are already heeding that advice. As the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) has lost $580.5 million since the start of the current quarter, IYR has lost more than $1.5 billion while investors have added $36.7 million to KBE.