How does the behavior of coyotes bred in captivity change from generation to generation

I am talking about coyotes bred by breeders, not those in zoos. Would their wild instincts fade gradually from the first captive generation to the next and so on, or would they be retained?

Only if the breeders bred the coyotes selectively. If they selected for coyotes with the most docile demeanors, bred them, and performed the same selection on their offspring, then yes it is likely that the "wild beast" could be bred out of the coyotes. However, this would have to occur over many generations. They have actually done this with foxes pretty recently, and they were successful.

However, you also have to consider that some of their wild instincts will always remain. It's the same situation with domestic dogs.