I've asked a Kraken guy a few days ago, he confirmed. But think of it, if Kraken's USD was USDT, they wouldn't provide USD/USDT for trading. Also they support plenty of currencies, from GBP to YEN. EURT exists, but there is no such Tether for these currencies.
..but that of course doesn't mean that Kraken holds enough fiat in banks for everyone. A USD on Kraken is still "virtual" and traded like a token. The only difference with USDT is that it's all Kraken, not a third-party company. (& eventually it's all a matter of trust. You allow your bank to hold only a tiny fraction of your money in it, but you wouldn't trust Kraken enough to allow it not to have a 100% full reserve. Kraken won't be saved by governments that's for sure)