Although it might be a bit unexpected, this is the intended result. The neighborhood views show only connections to unselected neighbors. These views are intended to highlight the relation between the selected nodes and their neighbors. Similar to omitting edges between selected nodes, the neighborhood views ignore edges between the neighbors, too.
Besides this, the hierarchical layout style of the views is primarily designed for showing edges between layers. Diagrams of this style tend to become unclear if there are several edges in the same layer.
You might want to add a feature request for an 'induced subgraph view' which would be more like the view you have expected.