It's be a shame if Bayonetta didn't get a sequel, although with Metal Gear Revengeance on the horizon I'm afraid I can't make myself feel too sore about the whole thing. With that said, there's going to be a lot of people disappointed if it turns out to be true and I can more than understand why. Bayonetta was one of those unique games that manages to match both a great amount of style with a great amount of fun, and it pulled it off excellently.
One site, Addict of Fiction, claim to have gotten a comment from a SEGA employee on the future of the Bayonetta series. Take it with a pinch of salt, of course, but either way it makes a good point.
"“SEGA is going through a lot right now, I mean the whole world is basically sailing down the shitter. I worked on the original Bayonetta, and I would love to see a sequel, but we haven’t even announced Bayonetta 2 yet.
"Sadly, I can’t tell you anything more than that.”
So as depressing as it is that Bayonetta 2 might have been cancelled, we don't even know for certain that it was ever really in development and, even if the quote turns out to be fake, that's an important thing to remember.