Push the cloves into the peeled onion so they stay put.
Put the studded onion, bay leaves, milk, salt, and pepper into a medium saucepan.
Gently warm over low heat until the milk is just about to simmer. Turn off the heat and let it steep for around 15 minutes.
Take out the onion, cloves, and bay leaves, then toss in the bread pieces.
Let the bread soak for a couple of minutes, then give it a stir to help it break down and thicken the milk.
Put the pan back on low heat. Stir gently as the bread breaks down more and the sauce turns creamy—this takes about 5-10 minutes.
Remove from heat, add the butter and nutmeg, and stir well.
Taste it—add more seasoning if you want. Serve right away, or cover to keep warm for later.