"Despite the criticisms made about Gramm-Rudman-Hollings, it must also be seen as an expression of the national will in America that the budget deficit must be brought under control. It is a tribute to Congress and the White House that they are willing to go back to a balanced-budget rule and adopt new procedures to attain that goal despite the sacrifices that that might entail." This comment by economist Sam Nakagama will appear this week in his weekly economic newsletter. The bond and the stock markets share Nakagama's enthusiasm for the legislation that President Reagan signed into law last week: Rates for long-term Treasury bonds declined about 50 basis points, mostly on the expected passage of the proposal. A basis point is one-hundredth of a percentage point.

Peter Davis Jr., a Prudential-Bache budget expert in Washington, said that the measure's "passage is definitely bullish. The deficit is finally on a downward path, not dramatically, but lower this year than last." However, Davis does not believe that the deficit will hit zero in 1991. He estimates "yearly reductions of $20 billion only you always have spending increases plus the compounding of the budget , with a deficit of $100 billion in 1991, and not zero." A significant effect of the bill's passage for Davis is that it gives Federal Reserve Chairman Paul Volcker more room (with interest moving lower, as well as oil prices) "to allow interest rates to fall without generating a lot more money."

Shearson-Lehman's budget wizard, Jim Capra, also has praise for the new legislation. He feels that the new law is "constructive" and "provides one thing the budget process has lacked all along: some sort of actual forcing event, the sequestrian procedure." This refers to a spending cut that is carried out by executive order. Davis of Pru-Bache is looking for a $11.7 billion sequester in fiscal 1986, with a resulting budget deficit of $187 billion. The bottom line is that the Gramm-Rudman-Hollings law has led to a watershed for budget deficits, which now should begin a long, tough journey down.

Another important factor is that this legislation signals -- for the time being, at least -- the end to supply-side economics. Gramm-Rudman-Hollings, in essence, recognizes that cutting taxes and increasing defense spending doesn't work. The measure places at the president's doorstep the act of reducing spending each year by $36 billion, of which at least half is to come from a reduction in defense spending. The alternative is to raise taxes, which is possible next year if the administration tries to soften the blow to defense spending. Goodbye supply-side economics.

One other thing: Because issuers of private-purpose municipal bonds feared that tax-reform legislation would limit the amounts of such securities that could be issued, they issued more of them this year than they would have ordinarily. This heavier-than-normal 1985 volume means, in turn, that they won't have to issue as many of these securities early next year as they would ordinarily. However, should the need arise, they still could increase their volume, which could mean higher yields.

On Tuesday, the Treasury will offer a 2-year note in minimums of $5,000, which should return 7.95 percent. On Wednesday, the Treasury will offer a 4-year note in minimums of $1,000, which should 8.40 percent.