Squash commits it does, but I don't think we really want squashed commits.
Squashing works to hide edit history from the opposing side, but it also pulls history out of your own history. You can create a branch at your local head before squashing to save those commits, but when you get an edit back, its new commit will reference your squashed commit. If you rebase onto the branch with your local changes, you can reconstruct "your history", but you'll have to be careful not to push commits from that branch to opposing next round, since it now contains your private edit history again.