Reproduction steps:
0. (As shown in the attached GIF file)
1. Create new empty project.
2. Create 2 cube objects.
3. Change first cube scale value to -1.
4. Change second cube Y position a little bit higher, so you can see both cubes.
5. Change second cube Z rotation value to 45.
6. Drag second cube on the first one in hierarchy window.
7. Notice, that X and Y scale values of second cube gets to 0.

Additional notes:
Has no effect on 90, 180, 270 and 360 degrees.
It looks like shrinking peak is at 45, 135, 225 and 315 degrees.