Cannot deduce correct type for varargs and overloads involving unions

Bug Report

I'm not really sure if this is strictly a bug or not, but as I understand it now, it seems to be.

Mypy fails to deduce the correct type for overloads involving unions, but I'm not sure why.

Please refer to the code snippet. If I'm wrong in my understanding, or if I should type the coalesce function in a better/different way, please let me know!

To Reproduce

MyPy Playground link: https://mypy-play.net/?mypy=latest&python=3.11&gist=5efc4f884ef3a447bf050a2eab005f70

from typing_extensions import overload
from  typing import TypeVar


_T = TypeVar("_T")


@overload
def coalesce(
    *values: _T | None,
) -> _T | None:
    ...


@overload
def coalesce(
    *values: _T | None,
    default: _T,
) -> _T:
    ...


def coalesce(
    *values: _T | None,
    default: _T | None = None,
) -> _T | None:
    """Resolves to the first non-null value, or to `default` if no value different than `None` could be found.
    """
    for value in values:
        if value is not None:
            return value
    return default


source: str | bool | None = "a"
default: str | bool = False
output: str | bool = coalesce(source, default=default)

# main.py:35: error: Incompatible types in assignment (expression has type "object", variable has type "Union[str, bool]")  [assignment]
# Found 1 error in 1 file (checked 1 source file)

Expected Behavior

It should work.

Actual Behavior

Mypy emits the following error, for the line where output is assigned:

main.py:35: error: Incompatible types in assignment (expression has type "object", variable has type "Union[str, bool]") [assignment]
Found 1 error in 1 file (checked 1 source file)

Your Environment

• Mypy version used: 0.991
• Mypy command-line flags:
• Mypy configuration options from mypy.ini (and other config files): (all defaults)
• Python version used: CPython 3.7

Start with the linked MyPy Playground reproduction and confirm the reported error for the varargs overloads using unions. Trace the overload and type-inference behavior responsible for producing object, then add a focused regression test; done means the example infers str | bool for output without an assignment error.