We have lots of coyotes here, and some of my friends walk their dogs carrying guns (not the dogs, my friends). If you put up a fence make sure the fence is also built to keep the coyotes out.
The pepper spray is a good idea, but while I won't say your dog is completely safe, coyotes really don't like people, even if they have a snack on the end of a leash. Try to avoid dusk and dawn, when coyotes are most active.
I'm in Colorado, and I've only heard about pets vanishing that were out in the yard on their own or got out unleashed. I would definitely be careful, but I think there are more crazy stories out there than actual incidents. I've been here over 30 years now, and I have yet to see a baby being carried off by an eagle.
