Is this a covariance bug in C# 4?

In the following piece of code I expected to be able to implicitly cast from elements to baseElements because TBase is implicitly convertible to IBase.

public interface IBase { }
public interface IDerived : IBase { }
public class VarianceBug
{
    public void Foo<TBase>() where TBase : IBase
    {
        IEnumerable<TBase> elements = null;
        IEnumerable<IDerived> derivedElements = null;
        IEnumerable<IBase> baseElements;

        // works fine
        baseElements = derivedElements;

        // error CS0266: Cannot implicitly convert type 
        //   'System.Collections.Generic.IEnumerable<TBase>' to 
        //   'System.Collections.Generic.IEnumerable<IBase>'. 
        //   An explicit conversion exists (are you missing a cast?)
        baseElements = elements;
    }
}

However, I get the error that is mentioned in the comment.

Quoting from the spec:

A type T<A1, …, An> is variance-convertible to a type T<B1, …, Bn> if T is either an interface or a delegate type declared with the variant type parameters T<X1, …, Xn>, and for each variant type parameter Xi one of the following holds:

• Xi is covariant and an implicit reference or identity conversion exists from Ai to Bi

• Xi is contravariant and an implicit reference or identity conversion exists from Bi to Ai

• Xi is invariant and an identity conversion exists from Ai to Bi

Checking my code, it appears to be consistent with the spec:

• IEnumerable<out T> is an interface type

• IEnumerable<out T> is declared with var