Git-credential-manager-for-windows: That Microsoft account doesn’t exist. Enter a different account or get a new one.

[trailmax]

I've switched my VSTS account to be connected to Azure Active Directory and ever since I can't push/pull to VSTS remotes. Whenever I get to access the remote I'm prompted with Microsoft Live login. But when I provide my VSTS email, I get a reply that

That Microsoft account doesn’t exist. Enter a different account or get a new one.

Well, yes, indeed this is not Microsoft Live account - this is Azure AAD account. I've checked with my other account that is also AAD - same deal, but old account that is MS Live - I get past this screen, to actually ask me for my password.

If I dismiss this prompt, in command line I'm asked for username and password - I give my same username and Personal Access Token previously generated and I'm through - I can push and pull with these.

Not exactly sure what happened here, but I used to be able to put AAD credentials to access VSTS and none of this stuff happened before.

What am I doing wrong and how to fix this?

p.s. using git v2.14.1.windows.1; Git Credential Manager for Windows version 1.12.0.
I'm seeing the same if connected to the project in Visual Studio - as soon as I try to push/pull, I get this screen.

[trailmax]

After discussion on Twitter the solution was to delete contents of %LocalAppData%\GitCredentialManager