mengxu

that is right.
bond price is inversely related to rates. rate goes up, price goes down. If you are long the bond, that is good for you.

that is what messed me up too, when I wrote the answer initially.

in this question - you are short the bond. so you want rates to go down. It would be bad if rates went up, since you sold the bond. If rates went up, you want them to go up only very little. so you need to buy an Interest rate CAP!...

CP