Walters scored 5 goals in 11 games while on loan from Bolton last sesaon, but the 19-year-old looks like staying at the Reebok Stadium.
City boss Taylor said: "We had talked about Jon coming back but having thought about the situation since the end of the season it's not going to happen.
No Return For Loan Duo
"He wants to try and secure a first-team place at Bolton and you can't blame him for that. I don't want to start the season with any loan signings. I want a squad that I know I can work with in the long-term."
The no loan rule would also rule out a move for Otsemobor, who has just signed a new deal with Liverpool. Taylor confirmed it's the "end of the story" as far as a return for the former England youth is concerned.
The no loan rule would also rule out a move for Otsemobor, who has just signed a new deal with Liverpool. Taylor confirmed it's the "end of the story" as far as a return for the former England youth is concerned.