We demonstrate a source for correlated pairs of atoms characterized by two opposite momenta and two spatial modes forming a Bell state only involving external degrees of freedom. We characterize the state of the emitted atom beams by observing strong number squeezing up to -10 dB in the correlated two-particle modes of emission. We furthermore demonstrate genuine two-particle interference in the normalized second-order correlation function $g^{(2)}$ relative to the emitted atoms.
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