In a VXLAN EVPN scenario, a transit VXLAN packet that has ttl of 0 or 1 in the inner payload is dropped when a loopback filter is applied on the transit device. This behavior is seen in QFX5100 platforms

Routing protocols will not establish neighborship and will be stuck in intermediate states.

In QFX5100, the transit VXLAN packets are processed by a register setting. When the loopback filter is applied, the payload of the inner packet with a ttl value of 0 or 1 is sent to the RE for further processing. Since the ttl is 0 or 1, the packet gets dropped. The firewall filter also parses the inner packet payload based on the L4-L7 fields, then the source IP or destination IP addresses.  Even if the filter has explicit terms that matches source and/or destination IP address, the rule will not be met. A default deny term at the end of the filter would be met. This affects only the transit VXLAN traffic.

To avoid such drop, an explicit rule should be added in the loopback filter to allow the inner payload packet with ttl as 0 or 1.  The rule can be framed based on the L4- L7 headers. For example, if it is an ebgp session which comes in with ttl of 1, an explicit rule can be added to allow the packet with port as bgp (179) port.
 

set firewall family inet filter Loopback_filter term bgp179 from destination-port bgp

set firewall family inet filter Loopback_filter term bgp179 then accept