Green’s Dictionary of Slang

here’s mud in your eye! excl.

also here’s spit in your eye! here’s mud! mud! mud in your eye(s)! with mud in your eye!
[orig. milit. use; thus ? ref. to the muddy trenches of WWI ]

a toast when drinking.

[US]K. Nicholson Barker I ii: Well, here’s mud in your eye! (She drinks it down and shudders).
[US](con. 1920s) J.T. Farrell Judgement Day in Studs Lonigan (1936) 469: ‘With mud in your eye, Irish!’ Joe said, drinking.
[UK]W. Watson Miss Pettigrew Lives For A Day (2000) 71: ‘Mud in your eyes,’ said Miss Dubarry.
[Aus]K. Tennant Battlers 175: ‘Here’s mud in your eye, Harry,’ the boy said, raising his mug to the Apostle.
[UK]G. Fairlie Bulldog Drummond Stands Fast 47: Drummond raised the tankard [...] ‘Here’s mud in your eyes!’.
[US](con. 1920s) ‘Harry Grey’ Hoods (1953) 268: ‘Let’s drink on it,’ I said. [...] ‘Here’s mud in your eye.’.
[Aus]‘Nino Culotta’ Gone Fishin’ 164: ‘Here’s mud. First one today.’ ‘One o’clock this mornin’ was today.’ ‘Aw, yeah, that’s right. Second one today. Mud.’.
[US]A. Hine Unsinkable Molly Brown 95: ‘Mud in your eye, Father,’ Johnny toasted.
[US]R. Coover Public Burning (1979) 436: Here’s spit in your eye, son!
[UK]‘John le Carré’ Smiley’s People 161: ‘Mud in your eye.’ ‘And in yours, Con,’ said Smiley.
[Aus]R.G. Barrett White Shoes 112: ‘Heer’s mud in your eye,’ winked Crystal.
[US](con. 1975–6) E. Little Steel Toes 90: Bud [...] fills five shot glasses, downs one, and says, ‘Here’s mud in your eye.’.