Incorrect intersection of inferred generic string types

[TPReal]

TypeScript Version: 2.6.1

Code

declare function func<A extends string,B extends A>(a:A,b:B[]):
    (ab:A&B)=>void;
const q=func("x" as "x"|"y",["x"]);
q("x");

Expected behavior:
Should compile: A is "x"|"y", B is "x", so A&B is "x".

Actual behavior:
Does not compile: q is of type (ab:never)=>void.

Hovering over the func call in TS Playground shows this:
function func<"x" | "y", "x">(a: "x" | "y", b: "x"[]): (ab: never) => void
which suggests both A and B were correctly inferred, but still A&B is wrong.

Another data point: removing extends string requirement on A makes it work (although then B is "x"|"y"). Also if func takes b:B (not array) as second argument, then it works.