The media attention on the upcoming initial public offering of Twitter obscures a much bigger and possibly worrisome economic phenomenon: junk bonds.

Global high-yield-bond issuance dwarfs new equity offerings. The Twitter initial public offering is expected to raise about $1.6 billion. In comparison, Sprint, the third-largest American telecom company, last month raised $6.5 billion in two simultaneous bond issues, the largest-ever junk financing.

In the first nine months of this year, global high-yield-bond issuance reached $378.2 billion. This is 27 percent greater than the same period in 2012, according to Dealogic, a financial-data firm. High yield (junk) bonds are defined as those issued by companies whose debt is rated below BBB. They are high yield because their risk of default is significantly high.

The popularity of the high-yield-bond market started in America in the 1980s. Drexel Burnham Lambert, led by Michael Milken, discovered there was a market for high-yield debt from new issuers.

Until then, high-yield bonds were primarily confined to a small, secondary market. They were called “fallen angels” because their issuers previously enjoyed an investment-grade credit rating before experiencing declining finances.

In 1989, Milken was banned for life from the securities industry after pleading guilty to charges of securities fraud. Nevertheless, the junk bond market has retained its vitality and has been growing at double-digit rates for the last few decades.

The market now comprises close to a quarter of the American corporate bond market. A study by Russell Investments, a consultancy, estimated its total size at $1.7 trillion.

And the junk market has expanded beyond America. According to Fraser Lundie, co-head of credit at Hermes Fund Managers, America had 89 percent of the market in 1998; now it represents just 57 percent. Europe has gone from 3 percent of the market to 27 percent.

European companies have benefited from the popularity of junk bonds after the financial crisis reduced the lending appetite of many European banks.

Why are junk bonds popular with issuers?

Companies have been urged to return excess cash to shareholders and to replace equity with debt. Recently, Carl Icahn urged Apple to borrow $150 billion in order to buy back their equity.

Record-low Treasury yields have pushed many income investors into lower-quality bonds. Many companies can now borrow at rates below where the U.S. government borrowed a decade ago.

Martin Fridson, the chief executive of FridsonVision, a research firm, noted that the spread between Treasuries and junk bonds has fallen for three consecutive quarters. Spreads refer to the absolute yield difference and can widen either from investment grade bonds getting richer or junk bonds becoming cheaper.

Fridson forecasts that spreads will widen in the current quarter. If so, investors in high-yield bonds could lose money as prices decline.

I worry about the popularity of junk bonds, because investors can lose two ways:

There is an inverse relationship between bond prices and interest rates. Today’s interest rates are abnormally low; when they rise, bond prices will go down.

Investors buying high-yield bonds need to worry about the return of their principal.

Junk credits have very uncertain business prospects, volatile cash flows and a high debt load. In a bankruptcy scenario, understanding the bond’s covenants is paramount: In bankruptcy proceedings, the court weighs heavily the preferences of seniority at the expense of junior obligations. Junior bondholders can even be forced to give up their bond status and take equity in a reorganized company.

I strongly urge working with professionals who specialize in high-yield bonds before investing in them.

Originally published in the Sarasota Herald-Tribune