We measure squeezing spectra for phase-dependent fluorescence of coherently driven two-level atoms in free space. The measured spectra are in excellent agreement with our predictions for a single two-level atom. We find that maximum squeezing occurs for homodyne detection at a phase near ±45° relative to the exciting field, rather than in the in- or out-of-phase quadratures. A new physical picture of phase-dependent noise that incorporates quantum collapses into a Bloch vector model shows why this occurs.