In a large bowl, whisk eggs, milk, sugar, nutmeg and vanilla until blended.
Gently fold in cubed bread; let stand about 15 minutes or until bread is softened.
Transfer half of the bread mixture to a greased 13x9-inch baking dish, and sprinkle with half of the cinnamon sugar.
Add the remaining bread cubes, including all of the liquid in the bowl, and top with the remaining cinnamon sugar.
Cover with foil, and place on a rimmed baking sheet on the middle rack in your oven. Pour warm water onto the rimmed baking tray coming up as high as you can.*
Bake for 40 minutes, remove the foil and continue baking for 10-15 minutes more until puffed, golden brown and a knife inserted in the center comes out clean.
While the bread pudding is baking, prepare your caramel sauce.
After you remove the bread pudding from the oven, let it cool for 10 minutes, and then cover the top with caramel sauce. You will have extra caramel sauce that you can serve on the side or save to use over ice cream, coffee etc.