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Bruce Mackenzie and Toby Ali were young bankers in the late 1990s, traversing Europe to pitch the merits of high-yield securities, otherwise known as junk bonds, to chief executives. The corporate chieftains mostly said no.

“They were suspicious about the product and more comfortable with their own local banks,” said Mr. Mackenzie, now the head of leveraged finance capital markets for Europe, the Middle East and Africa at Bank of America Merrill Lynch. Mr. Ali, now the bank’s head of leveraged finance for Europe, the Middle East and Africa, added, “Calling a company junk carried a stigma for people.”

Europe’s skepticism has since waned.

For many companies on the Continent, the high-yield junk bond market has become essential for raising money now that their local banks are making fewer corporate loans. While junk bonds have been an established part of corporate finance in the United States for the last three decades, the market in Europe has caught fire only in recent years. Junk bonds have gone to 53 percent of total European leveraged corporate debt issuance for the 12 months that ended in June, from 15 percent for the corresponding period in 2006, according to Standard & Poor’s Capital IQ.

“There’s been a step change since the crisis,” Mr. Mackenzie said.

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Greek banks, Spanish construction companies and recently insolvent German wood manufacturers are tapping the market, alongside other European banks such as Banco Popolare in Italy and fallen angels — investment-grade companies that have been downgraded to junk — like Fiat and Nokia.

Fanning the flames have been investors seeking higher returns in a time of low interest rates. They have been piling in at such a furious rate to buy such corporate bonds that the market, which was one-quarter the size of the United States high yield market in 2007, is now almost the same size.

Through July, European companies rated below investment grade raised $131 billion in high-yield bonds, 70 percent more than the corresponding period in 2013, according to Dealogic. And the European market has come a long way since 2006, when just $24.7 billion of deals were tallied for the same time period.

“The U.S. was significantly ahead of Europe in terms of its reliance on capital markets rather than bank-orientated funding,” said Ray Doody, head of acquisition leveraged finance in Europe, the Middle East and Africa at JPMorgan Chase. “This gap is now being closed rapidly.”

Yet just as investors in the United States have begun withdrawing from the junk bond market, some investors in European high-yield markets are sounding alarms. High-yield European corporate debt has a spread of just 382 basis pointsversus comparable German government bonds, according to the Bank of America Merrill Lynch European high yield index — compared with an average of about 630 basis points for the last 10 years, indicating to some that the market is not adequately assessing the risks of junk bonds. In June, the index traded at a spread as narrow as 297 basis points compared with German government bonds.

Terms on some junk bond deals being marketed resemble those of securities sold before the financial crisis, say hedge funds and asset managers, as debt issuers realize they can effectively dictate the parameters of the issue in such a red-hot market.

“We see a number of risks,” said Kevin Corrigan, head of credit at Lombard Odier, a Swiss private bank that manages $207 billion. Record low yields mean investors are not getting paid for the risk they are taking, and there is more concentration among the companies and industries issuing debt, he said, including banks, telecommunications, basic materials companies and fallen angels.

And while European high yield has historically commanded higher spreads compared with the United States junk bond market, indicating greater risks, that pattern reversed at the end of 2013, continuing into 2014. “Investors appear to be demanding less ‘protection’ from investing in European high yield, than U.S. investors,” in that market, Mr. Corrigan said.

Before the financial crisis, the European junk bond market struggled to take off. Companies relied on loans from their local banks, often at favorable rates for the companies. But as banks faltered in the crisis, frantically shrinking their balance sheets, European companies have increasingly looked to the high-yield markets for their borrowing.

That trend has coincided with a boom in mergers and acquisitions, driven in part by private equity firms selling companies they bought before the crisis, and some buyers financing those deals, as is typical, in the leveraged finance market.

At the same time, central banks have kept interest rates at historically low rates to stimulate economies around the world. This has meant that investors have looked to riskier asset classes like leveraged loans and high-yield bonds for returns.

“If you have been a high-yield investor in Europe, you have done very well,” said Alberto Gallo, chief macro strategist at Royal Bank of Scotland. “The question is whether it continues.”

The high-yield market has returned 130 to 150 percent since the beginning of 2009, according to Markit, depending on the indexes, Mr. Gallo said. The opening of the market has meant that smaller companies that never would have been able to issue high-yield bonds have piled in. Aldesa Construcciones, a Spanish construction company, used to be 100 percent financed by local Spanish banks. In March, it issued a 250 million euro, seven-year high-yield bond, yielding 7.125 percent, its first foray into the capital markets.

“We wanted to diversify our financing because the main providers used to be all Spanish banks,” said Miguel López de Foronda, the company’s chief financial officer. Now 66 percent of the company’s debt is funded from the bond market.

Soho House, the London-based private members club, issued a 115 million pound bond earlier this year even though the company’s earnings before interest, tax, depreciation and amortization was a meager £19 million (companies usually have at least £50 million in such earnings before they tap the markets, bankers say). The bond will fund its international expansion.

Strong demand has paved the way for jumbo deals. In April, Numericable, the French cable operator, and its parent group, Altice, together issued $16.7 billion in high-yield bonds, the biggest high-yield bond deal ever as part of a $23.2 billion financing package to fund the takeover of SFR, Vivendi’s telecom subsidiary. In spite of its junk rating, the deal attracted over $100 billion worth of interest.

“The demand far outstripped even our highest expectations,” said Mr. Doody of JPMorgan, who worked on the transaction.

European leveraged finance investors used to shun loans and bonds without standard protections. Now they are lining up for them, a sign that investors are stretching to secure higher returns.

“We are starting to see much more aggressive transactions being structured in the European leveraged finance market that are reminiscent of some of the excesses of the 2006-2007 boom period,” said a recent report from Standard & Poor’s.

For the first half of 2014, 36 percent of European leveraged loans were “covenant lite” meaning lenders do not have as many rights when the company has problems, compared with 21 percent last year and 7 percent in 2007, according to Standard & Poor’s Capital IQ. There has also been an increase in the issuance of payment-in-kind structures — where interest is paid with more debt or equity — and dividend recapitalization, say leveraged finance investors.

“All the totems of problematic underwriting are there but you are not getting an adequate reward to compensate for that risk in subinvestment grade,” said Duncan Sankey, head of credit research at Cheyne Capital, a $6.5 billion London-based hedge fund.

While alarm bells may be sounding in Europe, conditions are still relatively benign, some say. Credit quality is improving, says Paul Watters, head of corporate research at Standard & Poor’s in London. And private equity deals are nowhere close to the size they reached in the precrisis zenith of 2007 and the first half of 2008.

But concerns continue to stack up, including fears that when the market corrects even more severely and investors race for the exits, there will be no one to buy. That is because banks, as a result of tighter capital requirements, will be less able to buy what investors decide to dump. With more high-yield investors than ever, there are fewer market makers to soften a sell-off.

“The dealers that traditionally provided the liquidity simply can’t do so,” Mr. Sankey said. “That could turn an exit into a rout.”