In an enameled or stainless saucepan, bring wine, garlic and bay leaves to a simmer.
Slowly whisk in cheddar and bring back to a simmer.
In a small bowl, stir together cornstarch and water; whisk into cheese mixture and continue whisking until simmering and slightly thickened.
Add nutmeg. Transfer to fondue pot. Serve with large cubes of French or Italian bread, slices of fresh apple or pear, or fresh vegetables.
Read more about Fondue including history, etiquette and lots of helpful cooking tips.