Difference in the Applicative inferred for Seq[Seq[?]]#sequence between Scala 2 and 3

[s5bug]

Minimized:

import cats.syntax.all._

Seq(Seq()).sequence

Infers Seq[Seq[ in Scala 2, but Int => Seq[ in Scala 3.

Original use case, encountered in #scala-users:

import cats.syntax.all._

for {
  x <- Seq(0, 1, 2).permutations
  y <- Seq(Seq(-1, 1), Seq(-1, 1), Seq(-1, 1)).sequence
} yield (x, y)