Error message referring to non-existent variable: "cannot return value referencing local variable `__next`"

[khernyo]

Compiling the following code on stable result in an error message which is referring to a non-existent variable __next

use std::collections::HashMap;
use std::hash::Hash;

fn group_by<I, F, T>(xs: &mut I, f: F) -> HashMap<T, Vec<&I::Item>>
where
    I: Iterator,
    F: Fn(&I::Item) -> T,
    T: Eq + Hash,
{
    let mut result = HashMap::new();
    for ref x in xs {
        let key = f(x);
        result.entry(key).or_insert(Vec::new()).push(x);
    }
    result
}

The error message:

$ rustup run stable rustc --crate-type lib lib.rs
error[E0515]: cannot return value referencing local variable `__next`
  --> lib.rs:15:5
   |
11 |     for ref x in xs {
   |         ----- `__next` is borrowed here
...
15 |     result
   |     ^^^^^^ returns a value referencing data owned by the current function

error: aborting due to previous error

For more information about this error, try `rustc --explain E0515`.

rustc --version --verbose:

rustc 1.36.0 (a53f9df32 2019-07-03)
binary: rustc
commit-hash: a53f9df32fbb0b5f4382caaad8f1a46f36ea887c
commit-date: 2019-07-03
host: x86_64-unknown-linux-gnu
release: 1.36.0
LLVM version: 8.0

[estebank]

The correct error should be

error[E0515]: cannot return value referencing function parameter `xs`
  --> lib.rs:15:5
   |
11 |     for ref x in xs {
   |         ----- `xs` is borrowed here
...
15 |     result
   |     ^^^^^^ returns a value referencing data owned by the current function

[estebank]

Current output:

error[E0515]: cannot return value referencing local binding
  --> src/lib.rs:15:5
   |
11 |     for ref x in xs {
   |                  -- local binding introduced here
...
15 |     result
   |     ^^^^^^ returns a value referencing data owned by the current function

[estebank]

Triage: no change.