Arsenal rejected two bids for Fabregas last summer and, while many expect Barca to make a fresh attempt to sign the player at the end of the current season, director Raul Sanllehi said this week that they were not working on a deal.
"Cesc is a great Catalan player," Sanllehi said. "He played for us as a kid and he will be welcome back at Barcelona for the Champions League match. Right now, everything is dead regarding a transfer."
That prompted speculation in Spain that Madrid were set to revive their interest in Fabregas, with president Florentino Perez reported to have given the go-ahead for executive director Jose Angel Sanchez to speak to the player's advisors.
However, Valdes believes Madrid would have no hope of signing Fabregas.
"I cannot imagine Cesc wearing the white shirt," Valdes said. "As you know, I believe his wish is to return home, although that is not up to me. He knows our system perfectly and he would fit in well here."
Valdes also welcomed the news that Pep Guardiola is to prolong his contract for another year. "I always believed he would stay on," he said.
Sporting director Andoni Zubizarreta added: "We knew that Pep wanted to stay, because he's always said that. We are aware of his value as a coach and what he brings to us as a club.
"Both of us know our roles and their limits. This wasn't a hard, difficult or complicated negotiation, but neither was it easy or simple.
"It's a way of doing things that has worked for the club and for Guardiola too. It's not the normal or traditional way of doing things in football, but it has given us great results because of who is he and who we are."