Checking "Hidden" in grade item settings does not hide the item from student, at the same time selecting "Hide" from dropdown on the setup page does

When looking at Grade administration ▶ Setup ▶ Categories and items, showing/hiding the particular grade item does affect the given grades only from the tree view (from the dropdown). If you go into Item Edit view, then checking/unchecking 'Hidden' value won't make any difference to the grades given to that item (only to the item itself).

To reproduce (https://tracker.moodle.org/browse/MDL-49202?focusedCommentId=339147&page=com.atlassian.jira.plugin.system.issuetabpanels:comment-tabpanel#comment-339147):

1. Create an assignment
2. Submit it as a student
3. Grade the submission
4. Ensure that the student can see the grade and feedback
5. Go to Grade administration ▶ Setup ▶ Categories and items
6. Click 'Hide' within a dropdown for the assignment item
7. Ensure that the student cannot see the grade and feedback anymore (this is intended)
8. Now go back to Categories and Items, click on 'Edit settings' for the item
9. Uncheck 'Hidden' and save.
10. Ensure that the student still cannot see the grade (fault!)