Fixed income stalls, equities reign! Wall Street major banks' earnings season stages a "Game of Thrones," a generation of bond traders faces its darkest hour.

As Wall Street's fixed-income divisions came under pressure in the third quarter, their equities counterparts seized a rare opportunity to outshine their fixed-income peers. The equities divisions of the five largest U.S. banks are on track to generate more than $66 billion in revenue in the first nine months of the year, about $3 billion more than the expected revenue from bonds, currencies and commodities businesses. This growth was partly driven by prime brokerage operations serving hedge funds and large equity investors. This means that for the first time in a generation of bond traders' careers, they are facing the prospect of being overtaken by their equities colleagues for full-year performance. This will not only change departmental rankings and bonus allocations, but also challenge a long-held conventional wisdomthat computers will take over equity trading, thereby eroding fees and revenue. "Not long ago, people were worried about electronification and equity trading," David Solomon, chief executive of Goldman Sachs Group, Inc. (GS.US), told analysts. "But today, looking at our equities revenue and the way we've adjusted, the opportunities we face are greater than anyone could have imagined at the time." The above nine-month statistics are based on results published Tuesday by three of the largest banks in the industry, as well as analyst estimates for the other two largest peers, which are due to report Wednesday. So far this year, Goldman Sachs Group, Inc.'s equities trading division has posted two of its best quarterly performances ever. At JPMorgan (JPM.US), equities trading recorded its best third-quarter performance ever, up 49% year-over-year. Wall Street's fixed-income trading divisions are facing the impact of rising interest rates, which could depress the value of existing bonds and dampen client trading demand. The Federal Reserve raised its benchmark rate in September to curb inflation, and earlier this month, the 10-year U.S. Treasury yield approached its highest level in nearly 25 years. The same rate-hiking environment affecting trading businesses is actually benefiting banks' traditional lending operations. JPMorgan, Citigroup (C.US) and Wells Fargo & Company (WFC.US) posted record third-quarter lending revenue, with client borrowing demand remaining strong even as rates rose. Within fixed-income divisions, revenue from rates and spread products weakened, while foreign exchange and commodities showed greater resilience. Among the large banks that reported results Tuesday, only Citigroup's fixed-income trading revenue did not decline. The company's profit also benefited from standout performance in its services business, which helps companies and governments move and manage money. After the quarterly earnings season began Tuesday, most major U.S. bank stocks moved lower. Bank of America Corp (BAC.US) and Morgan Stanley (MS.US) are among those scheduled to report quarterly results Wednesday. Analysts at Truist Financial, led by Brian Foran, wrote in a note to clients that so far within the markets businesses, there is a tale of two extremes. Analysts also said that looking at the more traditional lending business, "one view sees a positive net interest income outlook, strong returns, and capital and consumer spending."