The Houston Chronicle reports that Andy Pettitte will return to the Yankees in 2008. Peter Abraham at the Journal News, reports he will be paid $16 million, which was the amount of his original option.

La Velle E. Neal III at the Minneapolis Star-Tribune reports that the Twins are upset with Hank Steinbrenner making public statements regarding their negotiations. Steinbrenner discussing Johan Santana could be viewed as tampering, as he is currently under contract with the Twins.

Neal also writes that the report that Santana will only waive his no-trade clause to go to the Yankees or Red Sox is untrue and Santana has not limited the teams he would go to yet.

Here’s a rundown of Hot Stove news this morning…

The New York Daily News reports that the Yankees are willing to meet the Twins demand for Philip Hughes in a deal to bring Johan Santana to the Bronx. GM Brian Cashman, owner Hank Steinbrenner, and long time scout Gene Michaels discussed via conference call the decision to include Hughes and have reportedly decided to meet the Twins demand.

According to the club source, there was spirited internal debate in the organization via conference calls about whether to make Hughes available.

In any case, the club finally agreed to put Hughes in a package that includes center fielder Melky Cabrera and at least one other lesser pitching prospect still to be negotiated, as of Friday night. And by doing so they believe they are the front-runners to land Santana, the two-time Cy Young winner.

The Red Sox are unwilling to part with Clay Buchholz or Jacoby Ellsbury which puts them behind the Yankees at this point in the race to bag the biggest prize of this off season.

Jorge Posada and the Yankees have finalized their deal. According the AP, after two weeks of work the two have completed a contract for four years and $52.4 million.  They site the Yankees as saying they are unconcerned of his age, since he could possible play DH or 1B in the later stage of the contract.

I think Posada is clearly an above average catcher, though I don’t think he is necessarily Hall of Fame material. I don’t believe he will enjoy the continued success he saw this season, and think this deal will end up looking bad towards the end, especially considering he’ll be 40 and still under contract. Sure…he could play first base. I remember that working out great for Mike when the Mets tried it.  As one of the few guys to have come up through the farm system and played his whole career a Yankee, you’d think he’d have been less about the money and years and more about staying with his team. But hey, its the Yankees. 

Lisa Kennelly and Ed Price of the Star-Ledger reports that the Yankees would have interest in signing CF Aaron Rowand if the team finds a suitor for Melky Cabrera.

Rowand’s agent, Craig Landis, said only that the interest in Rowand — a strong defender who this year with Philadelphia hit .309 with 27 homers and 89 RBI — “is strong and has picked up” since center fielder Torii Hunter came off the market, signing with the Angels. Landis said “nothing is imminent” as far as Rowand’s signing.

George King and Joel Sherman of the New York Post report that the initial asking price for Johan Santana is higher than they wished to pay. 

The Post writes that the Yankees have learned in the past 24-48 hours that the initial asking price by the Twins is exorbitant, well beyond just the Phil Hughes/Melky Cabrera level that had been generally anticipated.

An NL executive said to watch out for the Cubs (Felix Pie) and perhaps the Mariners (Adam Jones) as new players in the Santana sweepstakes.

“After the Dodgers, the Angels have the most and then the Yankees and Red Sox although it’s not clear if they have what the Twins want and need,” an evaluator said.

The Twins are seeking a centerfielder as well as a third baseman. The Angels have Brandon Wood to offer at third, the Dodgers have Andy LaRoche.

The Yankees are not willing to trade Joba Chamberlain and have no third baseman to give the Twins. The Red Sox do not have a third baseman to deal unless they include Kevin Youkilis, which is unlikely. The Red Sox seem unwilling to include Jacoby Ellsbury in a deal as well, which could put them out of the running even if they included pitchers Clay Buchholz and Jon Lester.

Yesterday, noted Twins blogger and contributing baseball writer for Rotoworld and NBC Sports, Aaron Gleeman told Hot Foot he thought the Mets could put together a package to get Santana, but they’re seen as a dark horse among the other teams contending for his services.

Gleeman suggested a package that includes two of either Lastings Milledge, Fernando Martinez, and Carlos Gomez, along with one of Mike Pelfrey, Philip Humber, or Kevin Mulvey in as the third piece. Gleeman said a lot depends on what other teams come to the table with, obviously, but the Mets definitely have enough desirable young players to get something done.

I’ve said this before, the Mets on the surface do not have the best package to offer but the teams who do seem unwilling to give up what the Twins want, which gives the Mets a better chance at their offer being relatively competitive, if not better than what other teams are willing to sacrifice.

The Yankees are far more willing to spend a ridiculous amount of cash than they are to want to give up their crown jewels in Cano, Hughes and Chamberlain. The Dodgers seem to want to hold onto their young outfielders. The Angels may choose to spend their prospects on Cabrera or Tejada instead. This puts the Mets in a better position than it appears on the surface to land Santana.

The Associated Press reports that the New York Yankees and the Minnesota Twins are discussing a possible trade for Twins pitcher Johan Santana.

Yankees senior vice president Hank Steinbrenner said Monday that discussions are ongoing but it was too early to tell whether they would lead to a deal. He did not detail how far talks had progressed.

“I don’t want to get into that at this point, as far as what they want, what we’re willing to give and all that,” he said. “It’s preliminary right now.”

Ron Mahay is considered to be the top middle reliever on the free agent market, compiling a 2.55 ERA in 58 games and 67 innings combined for the Rangers and Braves, holding lefthanded hitters to a .189 batting average last season.

Newsday reports that the Yankees are talking to Mahay’s agent but nothing is concrete at this time. 

According to the New York Post, closer Mariano Rivera is expected to accept the New York Yankees offer of 3-Years/$45 million early next week, making him the highest paid closing pitcher by $4 million.

Rivera, 37, was not his usual self last season, posting a 3-4 record and a 3.15 ERA. He converted 30 of 34 saves last season and now has 443 saves on the all-time saves list, good for 3rd overall.

Derek Jeter is alleged to have avoided paying income tax in New York between 2001 and 2003 by saying his primary residence was in Florida, the New York Times reports.

Florida has no state income tax.

Jeter and his agent, Casey Close, insist that while he has great affection for New York, his home is in Tampa, Florida.

Jeter lived in an apartment at Trump World Tower between 2001 and 2003 and was paid $38 million in basic salary as well as receiving a $16 million signing-on bonus payable between 2001 and 2008.

Newsday’s Business Beat blog explains that New York State is very serious about how it deals with part-time residents.

The Associated Press reports that according to a person familiar with the negotiations, Jorge Posada has agreed to a four-year, $52.4 million contract with the New York Yankees.

The deal was made just before the exclusive negotiation window closed on Monday night.

The $13.1 million a year average salary makes it the highest per year deal ever for a catcher, topping the one Mike Piazza had while with the Mets from 1999 to 2005.

Ken Rosenthal of FOXSports.com believes the Angels have emerged as a most intriguing possibility for Marlins 3B Miguel Cabrera to land through a trade. The Dodgers, Red Sox and Yankees all have interest as well, however the Red Sox are trying to re-sign Mike Lowell and the comments from Yankees’ representative Hank Steinbrenner saying that he would not trade one of the big three young pitchers.

Rosenthal also adds that the Washington Nationals would like to sign CF Andruw Jones but will likely have a tough time chalking up the money it will take to get him. He also notes that he sees the Giants and White Sox as two potential suiters with the Dodgers a possibility. The Padres would be more involved with him if his price dropped.

The Phillies believe that CF Aaron Rowand may command a four-year, $52 million contract. Both the Astros and Mets remain interested in free agent 2B Luis Castillo. The Indians, Padres and Dodgers could also enter the mix pending decisions within their franchise. The Twins are one of the teams attempting to trade for Red Sox CF Coco Crisp, but the Red Sox are demanding too much in return it appears. Teams with too many starting pitchers may look to the trade market to get rid of them. Indians starter LHP Cliff Lee, Brewers RHP Dave Bush and LHP Chris Capuano are amongst the possible choices.

Rosenthal ends on one final note. The Washington Nationals would like to trade for another young major league-ready starter. Mets 2nd-round draft pick in 2006 Kevin Mulvey is among one of the choices that Rosenthal adds, with the other being the Twins Kevin Slowey.

With the Mets in need of bullpen help. Could we be looking at a trade for one of the Nationals relievers? Chad Cordero or Jon Rauch could help this team in the bullpen and the Nationals are looking to get younger. The Nationals reportedly have interest in OF Carlos Gomez as well.

Yahoo Sports lists a number of players the Yankees may consider to replace Alex Rodriguez at third base.

Mike Lowell, Adrian Beltre, and Miguel Cabrera are among those mentioned. Scott Rolen is listed as a dark horse candidate, since he’s been plauged by injuries. The $36 million owed to him through 2010 would likely cost the Yankees little in the form of a trade, as the Cardinals would like to simply have the Yankees pick up most of his contract.