A lackluster year for Wall Street's fixed-income traders is just getting worse, as rising expectations for an interest-rate increase push up bond yields, eviscerating any hope of averting bonus cuts.

The five biggest U.S. trading firms -- JPMorgan Chase, Citigroup, Goldman Sachs, Bank of America and Morgan Stanley -- would collectively have to post fourth-quarter bond-trading revenue at least 52% above prior-year levels for full-2015 results to break even compared with 2014.

Year-to-date, their combined fixed-income trading revenue is down 8.9%, to $36.9 billion. That represents about 15% of their total sales.

A turnaround looks much less likely now that many investors and banks are betting the U.S. Federal Reserve will raise rates in December for the first time since 2006; Fed Chair Janet Yellen said last week that an increase was a "live possibility" if the economy remains on its expected trajectory.

It's not just U.S. Treasury securities that would face principal losses due to rising yields. High-yield bonds are likely to get hit as corporate defaults increase into 2016, Credit Suisse said last week in a report.

"The question is, 'When does the industry escape its fixed-income slumber?' and it's prudent to assume not anytime soon," said Mike Mayo, an analyst at the brokerage firm CLSA in New York.

Deutsche Bank said last week that Treasury yields are likely to shoot up in the coming months faster than most analysts expect, as foreign governments and central banks in China and elsewhere become net sellers of the securities after years of building up their holdings.

The yield on the 10-year Treasury bond could reach 3.5% by the end of 2016, from about 2.3% now, according to the report. Rising yields across the bond-market spectrum often lead to reduced underwriting activity, which in turn translates to lower trading volumes.

In the third quarter, amid signs of slowing growth in China, a deepening recession in Brazil and rising debt defaults in the oil industry, the five U.S. firms' bond revenue tumbled 19%. The banks include foreign exchange and commodities trading in their fixed-income results.

JPMorgan (JPM) - Get Reportsuffered the most, with revenue falling 23% to $2.9 billion. Chief Financial Officer Marianne Lake, during a conference call last month, attributed the dropoff partly to weakness in corporate bonds and other instruments tied to creditworthiness, "as clients were on the sidelines given the challenging market conditions."

Citigroup (C) - Get Report cited lower activity levels in securitized and high-yield credit products, while Morgan Stanley (MS) - Get Report noted that yields on asset-backed securities and distressed debt had risen faster than Treasury rates.

"Revenues in credit and securitized products were hardest hit" in the third quarter, CFO Jonathan Pruzan said on the third-quarter earnings call. For sales and trading businesses, the fourth quarter is the weakest season, he noted.

At Bank of America (BAC) - Get Report , where bond trading revenue has dropped 7.4% to $7.28 billion so far this year, CEO Brian Moynihan noted on a third-quarter earnings call that "markets are remaining challenging."

As of mid-October, JPMorgan's Lake said, the markets were so quiet that analysts' earnings estimates for the New York-based bank's fourth-quarter results looked too high.

One bright spot was Asian currency trading, where some banks profited from options bets that paid off when China allowed its yuan to slide against the U.S. dollar, said George Kuznetsov, head of research and analytics at the consulting firm Coalition in London.

Full-year fixed-income results for the world's biggest banks are likely to be down 5% to 7%, he said.

While the banks don't break out bonus costs specifically for fixed-income trading, JPMorgan said compensation costs through September for the umbrella investment-banking and securities-trading division were down by 4% from a year earlier.