Watt has been plauged with injuries since his switch to Swansea, who has spent the majority of the last two years sidelined with shoulder injuries.
"There was some interest from Scunthorpe and we spoke to Nigel and the club" Watt's agent Glenn Corcoran confirmed.
"We went up and met Nigel, had a walk around the ground and said that we would be interesting in talking to the club if something was going to develop.
"But for whatever reason, and we don't know why, Scunthorpe have decided they aren't interested in pursuing it any further.
Nigel Adkins is also waiting for an answer from centre Andy Butler, who has been offered a club record three year deal, in an attempt to keep him at Glanford Park for the assault on League One next season.