Phillips has played just 89 Premier League minutes this season and the champions are inviting offers for the England star.
Newcastle are keen to sign Phillips to replace the banned Sandro Tonali, but do not have the funds to do a permanent deal.
talkSPORT previously reported that Juventus had opened talks with the Citizens over a move for the England international in the New Year.
But in a new twist in the Phillips saga, the ex-Leeds star could now be set to remain in the Premier League.
Phillips has failed to cement his place as a regular under Pep Guardiola since making the move to the Etihad in a deal rising to £45million.
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He featured in just 12 top-flight matches last season, and has just four Premier League appearances to his name this term, with his last outing coming on November 4.
The player was the focus of discussion on the talkSPORT Breakfast show on Thursday morning, as Jamie O'Hara and Dean Saunders commented on which teams he would get in at.
Former Liverpool striker Saunders said: "That's a sought-after position, Man United signed Casemiro to play in that holding position.
"He could get in Man United's team, would he get in Liverpool's team? Probably. I think he's better than [Wataru] Endo when he's playing every week."
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Having his say, O'Hara then remarked: "I think he deserves a chance again, I think it's been harsh [treatment at City].
"He was really good at Leeds, and he's gone there, they spent a few quid on him, and he looks completely out of sorts when he plays.
Manchester City's Kalvin Phillips discusses the difference in tactics implemented between former manager, Marcelo Bielsa and Pep Guardiola
"Because he knows he's just never going to get in the side above Rodri, and now he [Guardiola] plays John Stones and Rico Lewis in front of him."
Saunders and O'Hara then claimed that Phillips would start for Newcastle and Tottenham, before the former insisted the treble winner will have to take a pay cut in order to move on.
He stated: "You can only sit there for so long... it's obviously very difficult to earn more money somewhere else, so he will be thinking, 'I've got to take a wage cut here to play football'.
"So it's when you make that decision, 'Do I leave and play football?', or 'Do I sit here on ridiculous wages?'"
Finishing up the Phillips transfer talk, O'Hara then said: "You've got to play football, it's as simple as that."