The filter is unstable. This can easily be remedied by converting to zero-pole-gain realization, and then second-order section implementation:
ftype = 'low';
fs = 32000
fn = fs/2; %(fs = 32000)
fc = 125/fn; %normalised passband frequency = 0.0078
fz = 135/fn; %normalised stopband frequency = 0.0084
[n, wn] = buttord(fc,fz,3,60); %(n = 60, wn = 0.0078)
[z,p,k] = butter(n, wn, ftype); % Use Zero-Pole-Gain Representation
[sos,g] = zp2sos(z,p,k); % Second-Order Section For Stability
figure
freqz(sos, 2^14, fs) % Filter Bode Plot
Then use:
signal_filtered = filtfilt(sos,g,signal);
to do the actual filtering.
