Using 169.254.0.0/16 addresses on transit links? I'm thinking of using `169.254.0.0/16` (link-local) addresses on OSPF transit links for increased security together with prefix-supression. This way the links are not reachable from any other non directly connected subnet. Do you see any problems with this?

This network is designed for local links. You will need to take steps to make sure that OSPF doesn't include these addresses in what it advertises to other routers.

Also, "The 169.254/16 address prefix MUST NOT be subnetted". This means that only one interface in this range per router since the router will complain that this network is already in use when you try to add it to another interface.

See RFC 3927, Dynamic Configuration of IPv4 Link-Local Addresses