  We study the effect of optical polarization squeezing on the performance of a
sensitive, quantum-noise-limited optically pumped magnetometer. We use
Bell-Bloom (BB) optical pumping to excite a $^{87}$Rb vapor containing $8.2
\cdot 10^{12} \mathrm{atoms/cm^3}$ and Faraday rotation to detect spin
precession. The sub-$\mathrm{pT}/\sqrt{\mathrm{Hz}}$ sensitivity is limited by
spin projection noise (photon shot noise) at low (high) frequencies. Probe
polarization squeezing both improves high-frequency sensitivity and increases
measurement bandwidth, with no loss of sensitivity at any frequency, a direct
demonstration of the evasion of measurement backaction noise. We provide a
model for the quantum noise dynamics of the BB magnetometer, including spin
projection noise, probe polarization noise, and measurement backaction effects.
The theory shows how polarization squeezing reduces optical noise, while
measurement backaction due to the accompanying ellipticity anti-squeezing is
shunted into the unmeasured spin component. The method is compatible with
high-density and multi-pass techniques that reach extreme sensitivity.
