By default, BGP sets the source IP address of the BGP message to the outgoing interface. BGP checks the source IP address of the received message against the configured address of the BGP peer. If there is a mismatch, BGP discards the message. For EBGP neighbors that are directly connected and there is not an alternative path to the peer, the default outgoing interface as source address is sufficient. If the connection fails, no alternative route is available anyway.
In the case of an IBGP connected peer with an alternative route, should the connection on the outgoing interface fail, the route is withdrawn. By setting the source address to a virtual interface, such as a loopback interface, because the source address of the route is still available when the connection fails and an alternative route is available, BGP reconverges and installs the alternative route. If multiple paths exist between the BGP routers, using a loopback interface as the neighbor‘s source address can add stability to the network.
Use the neighbor update-source command in BGP router configuration mode to specify an alternative source address instead of the default directly connected interface address as the source address advertised for this IBGP router.
The following example causes the TCP session to peer 168.192.50.5 to be established over the loopback interface 4.3.2.1:
System(su-config)->router bgp 65151 System(su-config-bgp)->bgp router-id 1.1.1.1 System(su-config-bgp)->neighbor 168.192.50.5 remote-as 5 System(su-config-bgp)->neighbor 168.192.50.5 update-source 4.3.2.1
See Configuring Source IP Address Update for a remote peer source IP address update configuration example.