Manchester City boss Manuel Pellegrini has revealed talks are set to take place over a potential extension to Frank Lampard's loan deal, and also dismissed any suggestion Sergio Aguero could be sold.

Lampard signed a contract with new MLS franchise New York City after leaving Chelsea in the summer, but was sent to sister club City on loan to maintain his fitness ahead of the U.S. club's first official matches in March 2015.

The 36-year-old former England international is due to return to his parent club next month but, after exceeding expectations at the Etihad, Pellegrini is eager to extend the loan arrangement.

"Frank has a contract with New York City and he is on loan here until December," he told the media. "Then we will talk with all the parties and we are going to decide. We can keep him if all the parties agree, but maybe we want to keep him and Frank wants to go."

He added: "I speak to Frank every day and I have the impression that he is playing better every day. I'm very happy with the loan so far."

NYC FC head coach Jason Kreis said in September that he did not believe Lampard's loan spell would be extended, but The Guardian suggests the midfielder would be open to staying on if City progress from their Champions League group.

Frank Lampard and Sergio Aguero have proved important players for City this season. Martin Rickett/PA Wire/Press Association Images

Pellegrini also rubbished the notion star striker Aguero could leave the club amid rumours he could attract interest from the likes of Real Madrid and Barcelona.

Aguero, 26, scored a hat trick as City beat Bayern Munich 3-2 in the Champions League in midweek to bolster their hopes of remaining in the competition, and his fine form has raised questions over whether the former Atletico Madrid star could become a target for La Liga's biggest sides.

However, Pellegrini said the Argentina international, who extended his contract until 2019 in August, is going nowhere.

"City is not a club that sells its players," the Chilean said. "It is a club that wants to buy good players as we want to improve every year.

"Sergio is very happy here and has five or six more years on his contract. I don't think he will move, but you never know in the future."

While Manchester United and Liverpool had to cash in on Cristiano Ronaldo and Luis Suarez when the Spanish giants came calling, Pellegrini said: "At this moment, Sergio doesn't want to go and we don't want to sell him."

City take on Southampton at St Mary's on Sunday looking to leapfrog Saints into second place in the Premier League table and close in on leaders Chelsea, who currently enjoy a nine-point advantage over the defending champions.