We theoretically analyze a Mach-Zehnder interferometer with trapped condensates, and find that it is surprisingly stable against the nonlinearity induced by inter-particle interactions. The phase sensitivity, which we study for number squeezed input states, can overcome the shot noise limit and be increased up to the Heisenberg limit provided that a Bayesian or Maximum-Likelihood phase estimation strategy is used. We finally demonstrate robustness of the Mach-Zehnder interferometer in presence of interactions against condensate oscillations and a realistic atom counting error.
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