These are quotes for the first game where Real Madrid plays at home and therefore it is not very clear how much the bookmakers consider City as a favorite. Here are quotes for the outcome of the confrontation:
To Qualify
Real Madrid 3.35
Manchester City FC 1.32
A huge bias in favor of the City, it is almost 75% to 25%. Perhaps this is a fair estimate, but still I will hope that we will see exactly the 25% where the City will be knocked out again.
The bookmakers do not consider so many things before they release odds but in a popular match as yhe one between Real Madrid and Manchester City, all the stats are available and the bookmakers must have investigated well. Most times they chose to play mind games to deceive the gamblers.
But for this match while bookmakers favoured Manchester could be because of these reasons;
1. Manchester City is more in form than Real Madrid
2. Some key Madrid players are already out because of injuries. Player such as Modric and Militao
Yes, I have no questions about the fundamental justification of the coefficients. But sometimes bookmakers behave in the exact opposite way - for example, poor (this season) Sevilla is quoted quite well in the Europa League. It seems to me that this happens only because of their historical achievements in this tournament. But if we go back to the Champions League, doesn't Real Madrid have the richest history in this competition than all the others (and even more so than City). At the same time, they are eternal underdogs.