2:15pm: Just because the Yankees would prefer to keep Damon on a one-year deal doesn't mean that's possible. Speaking to Jon Heyman, Scott Boras compared Damon to Jorge Posada, who got a four-year deal and Derek Jeter, who is expected to receive one, too.
11:49am: Lohud.com's Chad Jennings notes that the October and November performances by Pettitte, Damon, and Matsui won't affect the team's decisions on whether to bring the players back. The quote from Cashman: “What they were when they went into October, that’s what they still are regardless of how well or how poorly they played in October."
11:10am: Mark Feinsand of the New York Daily News also reports that the Yankees have interest in retaining both Damon and Matsui on one-year deals. In another article, Feinsand writes that the Yankees are "intrigued" by John Lackey.
9:20am: After months of talk that the Yankees would only keep one of Johnny Damon and Hideki Matsui, Joel Sherman of the New York Post hears that the World Champions will try to re-sign both players, plus Andy Pettitte. The Yankees are more intent on retaining their own free agents than they are on acquiring Matt Holliday, Jason Bay or John Lackey.
Yankees GM Brian Cashman would prefer to bring all three back on one-year deals to minimize risk. Teams might be reluctant to sign Damon - a Type A free agent - if the Yanks offer arbitration, because they'd lose a draft pick. The Yankees would have to be prepared to pay Damon $15MM or so if they offer arbitration, so they may try to work out a deal in the $10MM range instead.