Explanation/Reference:
http://www.cisco.com/en/US/docs/ios_xr_sw/iosxr_r3.7/routing/configuration/guide/ rc37bgp.html#wp1191371 BGP Routing Domain Confederation One way to reduce the iBGP mesh is to divide an autonomous system into multiple subautonomous systems and group them into a single confederation. To the outside world, the confederation looks like a single autonomous system. Each autonomous system is fully meshed within itself and has a few connections to other autonomous systems in the same confederation. Although the peers in different autonomous systems have eBGP sessions, they exchange routing information as if they were iBGP peers.
Specifically, the next hop, MED, and local preference information is preserved. This feature allows you to retain a single IGP for all of the autonomous systems.