Implementations disable baseline alignment for an item (and are lowered in precedence for baseline propagation) if it has auto margins on either side in the relevant axis: e.g.
https://www.software.hixie.ch/utilities/js/live-dom-viewer/?saved=8886

However we couldn't find this in the spec. E.g.
https://drafts.csswg.org/css-grid-1/#auto-margins only discusses general alignment etc. not normative.
https://drafts.csswg.org/css-align-3/#baseline-alignment doesn't seem to mention it.
https://drafts.csswg.org/css-grid-1/#grid-baselines

It might be implied(? - unsure) but at least a note discussing this interaction would be good.