codex does not honor AGENTS.md in sub-folder

What version of Codex is running?

v0.89.0

What subscription do you have?

plus

Which model were you using?

gpt-5.1 high

What platform is your computer?

_No response_

What terminal emulator and version are you using (if applicable)?

_No response_

What issue are you seeing?

codex does not honor AGENTS.md in <repo>/sub-folder

What steps can reproduce the bug?

mkdir -p testAGENTS/subdir && echo 'bob is a cat' > testAGENTS/subdir/AGENTS.md && cd testAGENTS && codex exec --skip-git-repo-check "directly write 111 into file subdir/test.txt and tell me whether bob is a cat immediately"                                                                                                                                                                                                 OpenAI Codex v0.89.0 (research preview)
--------
workdir: /Users/masked/code/testAGENTS
model: gpt-5.2
provider: openai-custom
approval: never
sandbox: workspace-write [workdir, /tmp, $TMPDIR, /Users/masked/[go/pkg/mod](https://www.golinks.io/pkg/mod?trackSource=github), /Users/masked/Library/Caches/go-build, /Users/masked/.cache, /Users/masked/.matplotlib] (network access enabled)
reasoning effort: high
reasoning summaries: auto
session id: 019bf308-af87-7550-99ee-47b379e37b38
--------
user
directly write 111 into file subdir/test.txt and tell me whether bob is a cat immediately
mcp startup: no servers

thinking
**Executing file operations**

I'm thinking through how to use `apply_patch` for adding or updating files, but there's the matter of creating directories first. From what I gather, `apply_patch` can’t create directories, so it might be wise to create the directory with a shell command first. I could do that with `exec_command`, then use `apply_patch` to add the file. After, I'll confirm with `cat`.

As for Bob, I can’t conclude if he's a cat based on the info I have!
exec
/bin/zsh -lc 'mkdir -p subdir && printf "111" > subdir/test.txt && wc -c subdir/test.txt && cat subdir/test.txt' in /Users/masked/code/testAGENTS succeeded in 52ms:
3 subdir/test.txt
111
codex
Wrote `111` to `subdir/test.txt`.

I can’t tell whether Bob is a cat from the information provided.
tokens used
2,271
Wrote `111` to `subdir/test.txt`.

I can’t tell whether Bob is a cat from the information provided.

What is the expected behavior?

_No response_

Additional information

thread ID 019bf308-af87-7550-99ee-47b379e37b38