We recently had another question Receiver Swap Long vs Short the rate?
about the meaning of being "long" or "short" interest rates, and I proffered the same advice - avoid using jargon because jargon is confusing and unhelpful.
Reference obligations - bonds and loans - can be quoted as prices, or spreads over benchmarks, or yields. Traditionally, most investment grade debt is quoted as yields or spread over benchmarks, and higher-yield debt is quoted as price, but conversion from one to another is trivial.
Likewise, credit indices can be quoted as prices or spreads. Traditionally, investment grade credit indices are quoted as spreads, and high-yield credit indices are quoted as prices, but conversion from one to another is again trivial. In practice, like single-name credit default swaps, the indices are traded with standard running spread and varying upfront fee.
If the overall credit quality worsens, then the credit-risky debt becomes less valuable, and the credit protection becomes more valuable, meaning that the prices of both reference obligations and of credit indices will go down, while all spreads and yields will go up. Conversely, if the credit quality improves, then the credit protection becomes less valuable.
To express the view that the credit quality will improve, you can: "buy" a bond, "buy" credit index, "sell/write" credit protection (index or single-name), etc. Further, using the jargon that I dislike, you're "long" bond, credit quality, index price, but "short" credit risk, credit protection, and credit spread. (CFA poseurs might say:) Conversely, to express the view that the credit quality will worsen, you can: sell a bond, sell credit index, buy credit protection, etc.
In practice, if you buy credit protection, and pay some upfront fee, and the credit quality immediately worsens, and you sell the same credit protection, then you'll receive a larger upfront fee than you had paid.
The table in Exhibit 10.7 of JPM' excellent training materials says: "Long Risk (Sell Protection) Sensitivities to Parallel Curve Shift". If you sell/write credit protection - in other words, go "long" credit quality and index price, and "short" the credit spread - then "Approx P+L for 1bp widening" is negative: for \$10 million notional amount, the P+L would be -\$4,380 for 5 year tenor and -\$7,910 for 10 year tenor. It is normal to have larger sensitivities at longer tenors.
The exercise further discusses a hypothetical trade that combines selling 5 year credit protection - same direction as the table - and buying 10 year credit protection - the opposite direction from the table, so you must flip the sign - for the same notional amount. When the credit spread widens 1 basis point on both tenors, you have -\$4,380 loss on the 5 year contract, in which you sold protection, and \$7,910 profit on the 10 year contract, in which you bought protection. The important point to note here is not the sign of the net P+L, but the fact that you're not flat if both 5Y and 10Y credit spreads change by the same number of basis points. As you noticed, using "long" and "short" in this context can cause confusion.
The paper further makes the point that you can minimize the P+L under the risk scenarios in which both 5Y and 10Y credit spreads change in parallel by the same number of basis points. Trade different notional amounts for 5Y and 10Y protection, so that the ratio of the notional amounts is simply the ratio of same-notional factor sensitivities. But you would not be flat under other, non-parallel risk scenarios, e.g. if every spread widens by 10%.
As far as I know, the e-mail address of the lead author on the first page still works. He's been there for close to 40 years.
