src/HOL/Tools/BNF/bnf_gfp_rec_sugar.ML

   let
     fun check_no_call t = if has_call t then unexpected_corec_call ctxt [t0] t else ();
 
     fun massage_mutual_call bound_Ts (Type (@{type_name fun}, [_, U2]))
         (Type (@{type_name fun}, [T1, T2])) t =
-        Abs (Name.uu, T1, massage_mutual_call bound_Ts U2 T2 (incr_boundvars 1 t $ Bound 0))
+        Abs (Name.uu, T1, massage_mutual_call (T1 :: bound_Ts) U2 T2 (incr_boundvars 1 t $ Bound 0))
       | massage_mutual_call bound_Ts U T t =
         (if has_call t then massage_call else massage_noncall) bound_Ts U T t;
 
     fun massage_map bound_Ts (Type (_, Us)) (Type (s, Ts)) t =
         (case try (dest_map ctxt s) t of