Real Madrid loan midfielder Canales to Valencia

Real Madrid has loaned talented midfielder Sergio Canales to Spanish rival Valencia for the upcoming season.

Canales, who is playing for Spain at the Under-20 World Cup, was limited to 15 appearances under coach Jose Mourinho after joining from Racing Santander before the start of last season in a ?5 million ($7.2 million) deal.

Both clubs say on their respective websites the agreement includes a buy-out option. Other financial terms were not released.

Canales says Valencia is where he ''wants to play - it's a very important step that allows me to keep competing with football's elite.''

The move ensures the 20-year-old plays Champions League football as Valencia qualified for the group stages thanks to its third-place finish last season.