Ok, I've moved forward. Setting next-hop self on the 172.16.112.1 seems to resolve the issue. However, on an eBGP session, I do not think this is required.
The other question is why all the prefixes are not affected. I realised that the prefixes affected are those that in the global routing table. So why will the router set the next-hop to itself when the prefix is in the global table.
These are the relevant configs, without the next-hop self
ASBR1-RACK1#sh run | beg router bgp
router bgp 100
no synchronization
no bgp default route-target filter
bgp log-neighbor-changes
network 0.0.0.0
network 101.101.101.0 mask 255.255.255.0
neighbor 172.16.111.1 remote-as 65001
neighbor 172.16.111.1 advertise-map def non-exist-map ASBR2
neighbor 172.16.111.1 password iementor
neighbor 172.16.113.2 remote-as 200
no auto-summary
!
address-family vpnv4
neighbor 172.16.111.1 activate
neighbor 172.16.111.1 send-community both
neighbor 172.16.113.2 activate
neighbor 172.16.113.2 send-community both
exit-address-family
!
router bgp 65001
no synchronization
no bgp default route-target filter
bgp log-neighbor-changes
network 11.11.11.0 mask 255.255.255.0
neighbor 10.1.1.254 remote-as 65001
neighbor 10.1.1.254 update-source Loopback0
neighbor 172.16.100.2 remote-as 1111
neighbor 172.16.100.2 password iementor
neighbor 172.16.111.2 remote-as 100
neighbor 172.16.111.2 password iementor
no auto-summary
!
address-family vpnv4
neighbor 10.1.1.254 activate
neighbor 10.1.1.254 next-hop-self
neighbor 10.1.1.254 send-community both
neighbor 172.16.111.2 activate
neighbor 172.16.111.2 send-community both
exit-address-family
!
PE1-RACK1#sh ip bgp vpn all 38.2.1.0
BGP routing table entry for 1:1:38.0.0.0/8, version 57
Paths: (1 available, best #1, table Internet)
Advertised to non peer-group peers:
10.1.1.254 172.16.111.2
1540
172.16.200.2 from 172.16.200.2 (210.112.4.1)
Origin incomplete, metric 0, localpref 100, valid, external, best
Extended Community: RT:1:1,
mpls labels in/out 50/nolabel
BGP routing table entry for 82:1:38.2.1.0/24, version 154
Paths: (1 available, best #1, no table)
Advertised to non peer-group peers:
10.1.1.254
100 200 65002 1
172.16.111.1 from 172.16.111.2 (101.101.101.101)
Origin incomplete, localpref 100, valid, external, best
Extended Community: RT:82:1,
mpls labels in/out 96/118
PE1-RACK1#sh ip bgp vpn all 13.1.1.0
BGP routing table entry for 1:1:0.0.0.0/0, version 51
Paths: (1 available, best #1, table Internet)
Advertised to non peer-group peers:
10.1.1.254 172.16.111.2
1540
172.16.200.2 from 172.16.200.2 (210.112.4.1)
Origin IGP, localpref 100, valid, external, best
Extended Community: RT:1:1,
mpls labels in/out 42/nolabel
BGP routing table entry for 82:1:13.1.1.0/24, version 139
Paths: (1 available, best #1, no table)
Advertised to non peer-group peers:
10.1.1.254
100 200 65002 1
172.16.111.2 from 172.16.111.2 (101.101.101.101)
Origin incomplete, localpref 100, valid, external, best
Extended Community: RT:82:1,
mpls labels in/out 95/117
PE1-RACK1#
PE1-RACK1#sh ip route 38.2.1.0
Routing entry for 38.2.1.0/24
Known via "ospf 1", distance 110, metric 20, type extern 2, forward metric 3
Last update from 12.2.1.1 on ATM1/0.10, 00:19:15 ago
Routing Descriptor Blocks:
* 12.2.1.1, from 210.112.4.1, 00:19:15 ago, via ATM1/0.10
Route metric is 20, traffic share count is 1
PE1-RACK1#sh ip route 13.1.1.0
% Network not in table
PE1-RACK1#
