The accumulation and custodianship of debt securities (bonds or loans) in preparation for securitization through a collateralized debt obligation (CDO) deal. Warehousing represents an intermediate step where debt securities are purchased and accumulated to serve as collateral in a contemplated CDO transaction.

A CDO is, by itself, a debt security that is collateralized (i.e., backed) by various types of debt obligations like bonds and loans of varying credit quality. Essentially, it is an investment-grade bond or debt security that is secured by a pool of variously rated debt securities such as highly rated bonds or junk bonds (high-risk, high return bonds). Underwriters of CDOs package a wide and diversified pool of securities and then divide the pool into consistent tiers (top, middle, and bottom), ranging from ones representing the higher credit quality collateral (which normally pay the lowest rate) to those representing the lowest credit quality collateral (which pay the highest interest rate)

These assets are maintained in a warehouse account until the target volume is reached, prompting the transfer of the assets to the corporation or trust established for the CDO.

Investments banks warehouse loans for CDO deals as potential investments for profit making.